EUR/GBP: zooming out of the charts, cross now at highest levels since Sep 2017
|- EUR/GBP has forced one to adjust their charts, zooming out, with a fresh daily high of 0.9062 - its highest since September 2017 at 0.9060, (Sep 15 2017 peak was 0.9121).
- Corporate hedging can have a big influence into month end.
- 0.9308 is the key upside target as being the August 2017 high on the wide.
The euro has rallied after Powell's neutral/dovish rhetoric where he sees no evidence that inflation will get above 2% and that the economy is not showing any signs that it could overheat. He spoke about prior instances whereby previous governors did not raise interest rates in the anticipation of higher inflation. At the same time, the pound has been on the back-foot due to no-deal and hard Brexit angst.
Corporate hedging possibly taking place
Also, on a rising euro, EUR/GBP has possibly been drawing EZ corporate treasury managers that may have otherwise wanted to wait until the end of the month before squaring up sterling receivables on foreign sales but have been forced to act slightly sooner in order not to be forced to be buying Euros too expensively, (especially if costed below the 0.90 handle for this period of the year). For UK companies, 0.9090 is a big level in respect of corporate hedging as being the inverted psychological 1.10 round number.
On the data front, the German IFO was above forecasts and rose from its weakest since Mar 2017 - (103.8 in July, f/c 101.9 in August. 101.2 is low for the series since 2016). German August IFO new Business Climate was a beat at 103.8 vs 101.9 forecasted and 101.7 previous. Current Conditions were 106.4, vs 105.4 forecast, 105.3 previous 105.4 revised while expectations were in at 101.2, vs 98.5 forecast, 98.2 previous.
EUR/GBP levels
That break of the 0.9032 level opens levels through to 0.9308 as being the August 2017 high on the wide. To the downside, it is not until the 2-month uptrend at 0.8877 where bears get back into full control. That level guards risk down to the 0.8720 triangle lows, (the 15th June low). Further out, the double bottom lows at 0.8697 are exposed.
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