Sterling Rallies On New PM
Littlefish FX | Jul 12, 2016 07:01AM ET
Key quotes from the Lloyds Bank (LON:LLOY) FX report: h2 Rising Tide Lifts All Boats/h2
The broad US equity index, the S&P 500 traded new all-time highs yesterday – the rally lifting the sentiment tide globally with all the major equity markets significantly off their lows. With high expectations that Japan’s Abe will double down on his “3 arrows” policy and announce additional fiscal stimulus, the Nikkei has rallied strongly and the JPY has come under strong selling pressure. Important daily trend resistance lies at 104.50/75. The announcement that Theresa May will be the next UK prime minister, potentially by tomorrow evening, has seen the GBP benefit from a portion of certainty – for now anyway. BoE Governor Carney’s appears before the Treasury Select Committee, which will be closely watched ahead of the MPC policy announcement Thursday. He is, however, wearing his FPC hat and is supposed to be answering questions on financial stability (the minutes of the 28 June FPC meeting will be published half an hour earlier). That said, Carney may receive questions on potential monetary policy measures, which he will presumably try to bat away. Economists are divided on whether the MPC will start to ease policy this week (a thin majority expect so) or whether it will decide to wait until the August meeting only three weeks away when further measures are expected to be discussed. The stream of US Fed speakers continues today, with scheduled appearances from Tarullo, Bullard and Kashkari. Yesterday, Esther George said that she didn’t dissent in the last meeting, and was merely worried about timing, which has been alleviated after June’s US labour market report.
GBP/USD
The market has taken joy from the announcement of Theresa May as the next PM. GBP has rallied strongly to test important intra-day resistance lying in the 1.3150-1.3225 region, a break would suggest a broader move back towards more important daily trend resistance around 1.35 can be seen. Key intra-day support now lies at 1.3040-1.30. Long term, the decline through the 2009 lows at 1.35 is viewed as the last phase in the bear trend that started back in 2007 from the 2.1160 highs. We doubt we will get a V-shape recovery. More likely we see a broader multi-month bottoming process. What isn’t clear yet is whether we start to develop this base around the 1.28 region, or at lower support levels in the 1.22-1.18 region.
Get The News You Want
EUR/USD
EUR is benefitting from the rally in GBP. We have developed a higher low in the 1.1020 region, over key support at 1.0910 and now seeing a push toward important 1.1150-1.12 resistance. A break here would suggest our bearish bias is wrong and that a re-test of the 1.1410 previous highs could be seen. Overall, while resistance holds our bias is for a move through 1.0910 toward 1.08-1.0750 support below. Longer term we are becoming wary that 1.0450-1.17 range is developing as a “flag” consolidation ahead of a test of key long-term support in the 1.00-0.99 region. We are monitoring this for greater clarity and confidence in this view.
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.