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Sterling And Euro Drop On Fresh Easing Bias

Dear Traders,

There was not much to be gained for euro traders as the recent trading days were characterized by sideways movements and unsteady swings. Ultimately, trading the EUR/USD didn’t really pay off. Unlike the euro, trading the British pound was much more profitable last month as record high volatility provided many profit opportunities.

Both euro and pound dropped on speculation central banks will expand easing as a consequence of the Brexit chaos. While the European Central Bank may shift the prospects of easing further in the future, the Bank of England could take the first step and cut interest rates by August. BoE Governor Carney signaled a rate cut within months, saying in yesterday’s’ speech “the economic outlook has deteriorated and some monetary policy easing will likely be needed over the summer”. Market participants are now pricing in a BoE rate cut at the early August meeting when the central bank releases new forecasts. Until then, the pound sterling is expected to be vulnerable to further losses.

The euro, however, initially declined on fresh easing bias but the losses were limited. Neither the upside break above 1.1135 provided any sustained profit, nor the downward movement below 1.1085 proved to be successful in the first two attempts. We are looking for better profit opportunities next week with the U.S. Non-Farm Payrolls scheduled for release next Friday.

Today we will keep an eye on important U.S. data such as the ISM Manufacturing index, due for release at 14:00 UTC. If this report comes in with an uptick, we could see the greenback strengthening. The German Manufacturing PMI (7:55 UTC) and U.K. PMI report (8:30 UTC) could be of secondary importance.

We wish you good trades and a beautiful weekend.

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