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Friday, June 9th
The UK general election is over and outcome of this event is not so optimistic for the pound, as the Britain has voted for chaos. According to the latest exit polls, the Conservatives failed to gain majority of seats in the House of Commons, which means that the UK now will face hung parliament. On the other hand, hung parliament will likely lead to a softer approach in the Brexit deal, which will be a big positive for the GBP in mid-term projection. Nevertheless, as for now current UK political situation will continue to create major uncertainty until new government will be formed, which in turn, heavily weighs on the pound. In accordance with the latest events, the GBP/USD pair met huge wave of volatility, having fallen for more than 2.5 cents, from the mid-point of 1.29 toward the level of 1.2700. Currently the pair is extending its decline, refreshing its nearly 2-month lows at 1.2663 spot, as European traders have hit their desks, providing the pair with additional pressure this morning. Now immediate focus shifts toward the UK Manufacturing Production report, however, any sharp moves will be limited, as traders will continue to digest the UK election results.
The EUR/USD pair remains under pressure today, wobbling around the level of 1.1200, on the back of yesterday’s ECB meeting. As it was widely expected, the regulator left its interest rate unchanged, while revised lower its projections for inflation in the region for the upcoming years. Moreover, President of the ECB M.Draghi also added some oil to the fire during his Q&A session, reiterating readiness of the ECB to ease its monetary policy if required. On the other hand, the pair got some positive side effect from the UK election outcome, which showed that the Conservatives failed to receive majority of seats that means that the UK has rejected “Hard Brexit” approach, which was suggested by the UK PM T.May. This outcome might be considered as positive for Brussels. Looking ahead, today economic calendar will remain relatively silent, with only set of secondary data reports from the US, so the pair will continue to follow global market sentiments, backed by recent crucial events.
The USD/JPY pair is trading on a firm note at the end of this week, having stepped over its psychological level of 110.00, as the US dollar has regained its positive mood on back of the sharp sell-off in the British pound led by the outcome of the UK general election. Moreover, seems that the situation on the market after the UK general election has begun to stabilize and hence, demand for higher risk assets is driving flows away from safe-haven Japanese yen. With an empty data calendar from the US economy, today any headlines regarding further UK political developments and broader risk trend will continue to determine pair’s directional course.
The NZD/USD pair was showing pretty volatile trades in the early Asian session, having refreshed its overnight lows at 0.7192 spot. However, the pair has managed to recover most part of its early losses and to retake the region of 0.7210-20 amid a recovery in risk appetite, as investors are favoring UK decision to reject “Hard Brexit” deal. Adding to that, slightly better Chinese inflation report has also provided the pair with some extra support in the Asia. However, further pair’s gains look unlikely on the back broadly stronger the US dollar and ongoing decline of oil prices. Nothing noteworthy is scheduled in data calendar for the pair at the end of the week, so broader market sentiment in the day ahead will remain as a key determinant for the pair.
The main events of the day:
UK Manufacturing Production – 11.30 (GMT +3)
Canadian Employment Change – 15.30 (GMT +3)
Support and resistance levels for the major currency pairs:
EURUSD S. 1.1150 R. 1.1300
USDJPY S. 108.91 R. 110.93
GBPUSD S. 1.2874 R. 1.3014
USDCHF S. 0.9598 R. 0.9734
AUDUSD S. 0.7511 R. 0.7571
NZDUSD S. 0.7172 R. 0.7242
USDCAD S. 1.3466 R. 1.3540
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