Volatility is again elevated this week as global money markets are still pretty active even though it’s now August and traders are looking forward to their summer vacations. Especially the current week is an important one as we’ve mentioned in our previous reports as there’s a host of significant market reports and developments scheduled for release.
The first couple of days have been mostly about the British Pound as the release of the Manufacturing and Construction PMI reports has been the warm-up before the important BoE meeting on Thursday. As we’ve explained before the significance of this meeting comes down to the fact that after it ends a press conference will follow, which is very usual for Fed meetings but something we rarely see from its UK counterparty. As such the Pound will be heavily in focus as Governor Carney will be answering questions about their monetary policy and future guidance.
Up until this point though the Pound has had a very inconsistent performance against the Dollar and the result of that has been a very volatile and unstable Cable price action. The miss in the Construction PMI report and expectations for a lower reading in the Services’ sector report have driven the Cable lower below the 1.5550 level earlier overnight but not without pulling higher at the beginning of the day yesterday.
Since the end of last week the Cable has illustrated quite a volatile profile and that comes down to the significance of this week’s BoE meeting and US jobs report release within a couple of days. Both events are expected to provide support to their respective currencies and as investors are positioning themselves in favor of both the Dollar and the Pound ahead of these events the Cable pays the price of volatility. We suggest caution as the price action is expected to remain edgy especially as the trading volume is thinner due to summer’s holidays.
The Euro on the other hand started the week quietly but yesterday the Single currency picked up some pace and proceeded lower to break the previous 1.0900 support level. The Euro is trading near the 1.0850 area this morning and as the bias is towards lower levels the question now is where will it stop. The US NFP report on Friday is expected to lift the Dollar even more so it seems that the Euro will remain under pressure, next support area lies around the 1.0800 figure.
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