Focus remains on the Cable as UK employmenta data are on the docket

Mixed performances across the major instruments was the theme of the day yesterday with instability and change in direction being the takeaway for the day. We talked about how the Euro and the Pound were in focus in light of the ZEW Survey and the release of the inflation data from the UK and both reports took their toll on the major European currencies.

The Euro benefited from the better than expected ZEW reading and that combined with the lack of any US-related news allowed the currency to rally near its previous lows once again. The Euro was bearish at the start of the week dropping below the 1.0900 level however this sudden reversal illustrates the lack of clear outlook in the Euro. As long as the Dollar doesn’t establish a clear bullish bias then the currency will continue to change direction like this.

The Cable was the other focus of the day as the release of the inflation report and BoE Carney’s comments were in play. The BoE Governor was the one that outlined the Pound’s outlook in the end when he made clear that “now is not the time to raise interest rates” driving the UK currency lower. The early morning attempt to recover was abandoned and the Cable dropped to a fresh low of 1.4150 and as the bias remains bearish we might see even further losses down the road.

Today the focus will be on the Pound again as the release of the employment sector’s data will offer more insight in the domestic economy. The Average Weekly Earnings component will be closely monitored as wage growth has been lagging in recent reports, a positive reading here might allow the Pound to breathe a bit easier against the Dollar today.

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