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By xemarketanalysis July 31, 2019 10:45 am
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    XE Market Analysis: Boris and Brexit and Banks, Oh My!

    OVERVIEW

    • The FOMC takes the stage again in the latest episode of the Rate is Right
    • Canada's economy continues to grow incrementally
    • Meanwhile, the European economy continues to retract incrementally

    HIGHLIGHT

    The currency market is set for a bumpy session today with all eyes cast on the Federal Reserve. The central bank is expected to deliver an “insurance cut” of 25 basis points. The move has been already priced in though and the focus will be therefore on the language of the policy statement and forward guidance from Powell’s press conference. 

    US DOLLAR

    The US Dollar Index currently sits atop a nine-week high, whilst the British pound remains under pressure trading close to the two-year low against the USD. Month-end flows are also in play. We expect volatility to go multiple notches higher after the key announcement and during the FOMC press conference.

    BRITISH POUND

    The fate of the Sterling remains at the mercy of Boris, Brexit and the Bank of England. The country has a new PM but facing the same old issue - how to exit the EU without causing an upheaval. With less than 100 days to go, the likelihood of a no-deal Brexit has increased sending the pound into a downward spiral. Recent moves in GBP/USD are overstretched and we are likely to see a bearish rebound but the key level of 1.20 is likely to be tested over the coming sessions.

    EURO

    Eurozone economies slowed down by 0.2% in the second quarter as per the latest GDP readings. In Q1, the bloc expanded by 0.4%. Inflation also remained low in July at 1.1%, down from 1.3% in June. The near-term outlook points to more downside which should encourage the ECB to act sooner than expected. EUR/USD stays close to 2019 low with Euro bears likely to limit any further upside.

    CANADIAN DOLLAR

    The Canadian economy expanded by 0.2% in May, rising for the third consecutive month. There healthy gains in the manufacturing sector (up 1.2%) and the construction industry grew 0.9%. The incoming data points to a steady return to potential. The headline number also sent encouraging signs to CAD bulls to push the USD/CAD pair towards the lower end of today’s trading range. We expect the market to challenge the long-term support line near 1.31 figure.

    AUSTRALIAN DOLLAR

    The Australian CPI was positive, yet the Australian dollar didn't get much love from investors and AUD USD is hovering around the 0.69 mark. It is kind of a slow day for the greenback too so, let's not be too hard on our friend Aussie.

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