Ranges More Likely In FX This Week Than Breakouts But If We Break...
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The UK saw no news and a further short-covering rally for GBP/USD, which has continued overnight. The market expects an improvement in the August CBI industrial trends survey, but that won’t have much impact. We’re getting back into very alluring territory for re-setting GBP/USD shorts, though there’s no great urgency as the dollar struggles.
The dollar struggle is replicated in EUR/USD. Relative rates scream ‘rangebound’ at the top of their voices, but the Euro’s been top-toeing higher on balance since the start of July and the 2016 high at 1.1530 is a bit magnetic. The papers are full of the Merkel/Renzi/Hollande meeting but it’s PMI morning in Europe and we’d react more to good than to bad news at this point. Which takes me back in a circle, really.
The US sees August Markit PMI and July new home sales data, but as Treasuries have settled back into their tiny range, yield-hunters are back in the driving seat.
Ranges seem more likely than breakouts this week, but if we break, it ought to be in the direction of dollar weakness as yield-hunters get greedy, and it may well be reversed in September.