Cable in focus as traders are waiting for more volatility down the road

The British Pound was in focus yesterday as currency markets started the week in quite a vibrant way with volatility in elevated levels and interesting price action in most instruments. As the week progresses we will have the opportunity to get fresh news from across the globe that will spark more volatility in all currency pairs as the next few days are packed with very important economic events.

Yesterday the focus was mainly on the Pound and the Dollar with the release of the UK Manufacturing and US ISM Manufacturing reports that both printed in a bullish manner. Especially the UK report surprised analyst when it printed a lot better than previously expected propelling the Pound’s outlook higher. Similar reaction however had the US Dollar when the manufacturing levels printed in a positive manner allowing the Dollar to pick up some gains by the end of the day.

Today the calendar is relatively quiet compared to the next days with only a Construction PMI reading and US Factory Orders pending for release and both reports aren’t what we’d call market movers. Nevertheless though interest will remain high as traders will be looking towards the upcoming events in the US and the UK leading up to Friday’s NFP employment report. As we move closer to the end of the year and the start of the new, the rate raising debate becomes more and more important hence the volatility in the markets.

Taking a brief look at the price action yesterday, the Euro remained muted for the entire day having settled in a consolidation pattern between the 1.1000 and 1.1100 areas. The release of the US manufacturing levels was not enough to spark any action in the currency and it is likely that it will remain trading sideways today as well. We have to keep in mind that ECB President Draghi is doing some public appearances this week so the risk for further easing chatter is on and the Euro could lose the 1.1000 support looking for its previous 1.0900 lows.

The Cable was rather vibrant yesterday though after the release of the Manufacturing and ISM reports from the UK and the US respectively. The Pound rallied to the 1.5500 level when the surprisingly higher manufacturing levels hit the wires in the morning but later in the day the reaction from the US dragged the currency lower to test the 1.5400 support area. Volatility will remain high, the Construction PMI is expected to print lower but a surprise is always possible. As long as the Cable remains above the 1.5400 floor then its outlook remains bullish.