At the beginning of the European session, MPC member Ben Broadbent, after hitting the pound yesterday, dealt another blow in an apparent attempt to keep it down a while longer and support British exports. In an interview with Press and Journal, he said that he wasn’t currently inclined to vote in favour of a rate hike. The pound/dollar reacted to this with a 35-pip slide. A session low of 1.2812 was recorded, but the pound recovered against the dollar after UK unemployment data was released, pushing it up by 58 pips to 1.2870.
The euro/dollar rate fell to 1.1442 (-48 pips) on the back of correctional movements on the euro/pound (-52 pips) caused by UK statistics. The rebound on our main pair amounted to 45% of the upwards movement from 1.1383 to 1.1490. If the hour closes below 1.1436, this level will become broken for buyers. A fall below 50% could lead to a closing of long positions before Janet Yellen’s testimony.
Were it not for Donald Trump Jr.’s Twitter post and Ben Broadbent’s interview, the euro/dollar would already be trading below 1.1380. Now, we await some food for thought from Janet Yellen. The market has factored in 3 rate hikes for the year. Any hint of another this year would cause the dollar to slide across the market. If her statements are more or less neutral, the euro/dollar rate will continue its correctional movement towards 1.1425.