Traders focus their attention on the Pound today ahead of the UK Retail Sales

Interesting price action across most major instruments over the past 24 hours as we had fresh news and developments from multiple fronts. All three of the major currencies were in play yesterday with the Euro responding to the Greek Parliament voting the second round of measures ahead of the negotiations with the Eurozone, the Pound trading on the back of the release of the MPC minutes and the Dollar getting a boost from the strong Home Sales report.

It goes without saying that due to the number of developments over the past session the major currency pairs responded with attractive price action and increased volatility changing direction during the day. However what is important to note here is that even though we’ve had fresh news it simply confirmed our previous views over the outlook of the major currencies: the Euro remains fragile and still looks bearish, the Pound is on its way for more gains over the medium term and the Dollar looks poised to extend its rally next week.

Taking a more detailed look at the price action, the Euro dipped below the 1.0900 support area early in the morning as traders looked to cash out their gains from the recent relief rally to the upside. This is a clear indication that market participants have little faith in the Euro’s outlook and look towards the upcoming negotiations for Greece’s aid package with skepticism due to the diminishing solidarity of the Greek ruling party of SYRIZA.

Overnight the Euro recovered as the Greek Parliament voted in favor of the second round of necessary measures requested by the country’s creditors in order to begin negotiations for a third package. However the recovery seems short-lived and light of the issues within the ruling party and the upcoming difficult round of talks the Euro looks bearish and a move towards its previous lows seems very likely.

The Cable was equally active over the past 24 hours and was on the rise when the minutes from the last MPC meeting were released to the public. The report revealed an elevated tone of bullishness among the members of the committee that hinted towards a higher interest rate policy even sooner than expected.

As a result the Pound gained against the Dollar initially and even though later in the day the US currency gained some ground the outlook for the Cable looks bullish and a retest of the previous highs would look a natural development if today’s Retail Sales report prints strong as expected.