Euro (Still) Remains Below 1.10, Pound Trends Upwards

 | May 08, 2017 06:20AM ET

The euro opened this week slightly higher after Emmanuel Macron has beaten Marine Le Pen in the second round of the French presidential elections. Since a Macron victory was widely expected, the euro's upward movement was limited to a high of 1.1022 while early gains were quickly erased following this week's market opening.

With the French election behind us, the focus now shifts back to the deviating paths for monetary policy. While the European Central Bank is not expected to put an end to its accommodative monetary policy in the near term, the Federal Reserve is anticipated to raise interest rates again next month following Friday's robust jobs report. Market participants will pay attention to Fed speeches scheduled throughout the week while ECB president Draghi is scheduled to speak in Dutch Parliament on Wednesday. The most important piece of U.S. data will be CPI measures of inflation and retail sales, both reports are due on Friday.

The British pound reversed shy of 1.30 but found some halt near 1.2950. Sterling traders eagerly await the Bank of England's 'Super Thursday' when the BoE will announce its rate decision and present its updated quarterly inflation report. Investors will search for clues as to whether policy makers show an increased willingness to normalize monetary policy. If BoE officials appear to be moving away from their neutral stance, the pound could be vulnerable to further gains despite Brexit uncertainty.

GBP/USD
There could still be some room for further gains even if the Relative Strength Index (RSI) tends to be in overbought territory. In short-term time frames we expect the pair to trade between 1.3020 and 1.2860. However, with no major economic data scheduled for release until Thursday, the pound may lack direction.