The U.K.’s formal triggering of Brexit has proved to be a non-event for traders. The market showed little reaction to the Article 50-trigger with the pound trading consolidated between 1.2480 and 1.2385. However, the GBP/USD remains a sell on rallies against the background of uncertain prospects for the U.K. economy and, in a countermove, the Federal Reserve’s tightening path.
In short-term time frames, chances are in favor of upcoming breakouts given the symmetrical triangle. A break above 1.2465 could push the pound towards higher targets at 1.25 and 1.2560, whereas a break below 1.2420 may reinvigorate bearish momentum towards 1.2340.
The U.S. dollar received some support from fresh hawkish Fed comments particularly from Fed President Eric Rosengren who was in favor of a total of four rate hikes this year. The latest round of hawkish comments should serve as a reminder that the Fed is still the only central bank which sees the possibility for additional rate hikes in 2017 amidst a healthy economy growth.
The U.S. GDP report is scheduled for release today at 12:30 UTC and could have an impact on the dollar’s price action.
The EUR/USD traded lower following the Brexit trigger. After dropping below 1.0775 the bearish move came to a temporary halt at 1.0740. Whether we will see further losses in this pair could depend on the German Consumer Price Index, scheduled for release today at 12:00 UTC. CPI data is expected to show a slowdown and this could increase pressure on the European Central Bank to maintain its accommodative monetary policy. If the euro falls below 1.0740 it could extend its losses towards 1.07 and 1.0650. On the upper side, euro bulls may wait for a renewed break above 1.0825 in order to buy euros towards 1.0920.
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