GBP: The other dollar – MUFG

Sandeep Kanihama FXStreet Contributor

Derek Halpenny, European Head of GMR at MUFG, suggests that they expected after the election of Donald Trump that there was an increasing chance that expectations of a stronger US-UK relationship post Brexit with Trump in the White House would result in the pound being viewed increasingly like the US dollar.

Key Quotes

“Yesterday, was a good example of that with EUR/GBP moving more in line with the EUR/USD drop than GBP/USD. Sure, the ECB announcement meant the euro was the mover yesterday but in the past on days of EUR moves, GBP/USD has moved more in sync. A look at rolling correlations does also confirm this with the 60-day rolling correlation between EUR/USD and EUR/GBP jumping sharply from -0.72 on 8th November when Trump was election to +0.43 as of yesterday. At the same time, the GBP/USD correlation with EUR/USD is weakening.”

“The resilience of the UK economy is also highlighting the similarities in the UK and US economic cycles (cyclical lows in unemployment rates; strong consumer spending and finally rising wage growth). A test of that theory might come next week when the FOMC announces its rate hike but nonetheless, we do believe GBP/USD volatility related to EUR/USD will continue to diminish and hence why we assume when EUR/USD falls below parity next year, EUR/GBP will be dragged to levels below 0.8000.”

Author

Sandeep Kanihama

FXStreet Contributor

Sandeep Kanihama is an FX Editor and Analyst with FXstreet having principally focus area on Asia and European markets with commodity, currency and equities coverage. He is stationed in the Indian capital city of Delhi.

EUR/USD bounces off lows, back to 1.1860

EUR/USD now manages to regain some balance, retesting the 1.1860-1.1870 band after bottoming out near 1.1830 following the US NFP data on Wednesday. The pair, in the meantime, remains on the defensive amid fresh upside traction surrounding the US Dollar.

GBP/USD rebounds to 1.3660, USD loses momentum

GBP/USD trades with decent gains in the 1.3660 region, regaining composure following the post-NFP knee-jerk toward the 1.3600 zone on Wednesday. Cable, in the meantime, should now shift its attention to key UK data due on Thursday, including preliminary GDP gauges.

Gold stays bid, still below $5,100

Gold keeps the bid tone well in place on Wednesday, retargeting the $5,100 zone per troy ounce on the back of humble gains in the US Dollar and firm US Treasury yields across the curve. Moving forward, the yellow metal’s next test will come from the release of US CPI figures on Friday.