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EURUSD: Euro slides against the dollar as the pound weakens

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On Thursday, trading on the Euro closed down. The single currency slid in response to the EBC's decision to maintain key rates at their current levels as well a reduced inflation forecast.

This year's inflation forecast for the Eurozone has been downgraded from 1.7% to 1.5% and for 2018 from 1.6% to 1.3%. By 2019, inflation is forecast to be around 1.6%. The forecast for economic growth in 2017 has increased from 1.8% to 1.9%.

Mario Draghi's press conference sparked a surge in volatility on the Forex market, but the head of the ECB managed to keep the Euro trading within a 35 pip range.

The market had been bracing itself for former FBI director James Comey's testimony to the Senate. However, as it turned out, his comments failed to cause much surprise. At the Senate hearing, there was no direct accusation implicating Russia on the question of potential interference from Donald Trump in the FBI's investigation. Now, Democrats and Republicans will both interpret Comey's testimony to their own ends.

Market expectations:

In Asia, the Euro/dollar has fallen to 1.1179 while the pound has collapsed by 230 pips. It has now been confirmed that the Conservative Party has failed to win an outright majority, resulting in a hung parliament.

Day's news (GMT 3):

  • 09:00 Germany: CPI (May), trade balance (Apr);
  • 11:30 UK: manufacturing production (Apr), consumer inflation expectations, industrial production (Apr);
  • 15:30 UK: NIESR GDP estimate (May);
  • 15:30 Canada: net change in employment (May), unemployment rate (May), capacity utilisation (Q1);
  • 17:00 USA: wholesale inventories (Apr);
  • 20:00 USA: Baker Hughes US oil rig count .

EURUSD rate on the hourly. Source: TradingView.

Intraday forecast: low: 1.1175, high: 1.1236 (current in Asia), close: 1.1180.

Buyers are disappointed by the ECb's decision to maintain key rates and their QE program at their current levels. James Comey also failed to increase volatility on currency markets.

In Asia, the British pound is currently undergoing some sharp fluctuations. As the votes are being counted, it has now been confirmed that the Conservatives have failed to reach a parliamentary majority and the leader of the Labour Party, Jeremy Corbyn, has called on Prime Minister Theresa May to step down.

The final results are still coming in, but it's already clear that the pound has dropped by around 1.9% and won't be coming back any time soon. Buyers have given up. The pound will now dictate the sentiment on all pairs. I imagine that once the EUR/GBP cross calms down, the Euro will fall with the pound against the dollar to 1.1170. It would be better for sellers if this fall extended to 1.1150.

June options expire today. The 1.1253 option level has survived. Now, sellers of Call options with a strike above 1.12 need to keep the rate in the 1.1200 region. In such a case, all options will be out of the money and buyers will lose out on the premium paid when buying the options.



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