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The EURUSD has bounced off an internal trend line while the US dollar is also starting to show a turn to the downside. At the US open Federal Reserve members Jim Bullard and Robert Kaplan both gave positive analysis of the US economy saying that it is likely the USA will have a strong labour market and continued strengthening Gross Domestic Product (GDP) figures.
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Before the Fed spoke President Christine Lagarde of the European Central Bank (ECB) said underlying inflation pressures on headline inflation will be roughly counterbalanced by the expected decline in energy prices. Though today’s prices action is more of the same for the WTI crude oil markets. The ECB expects inflation to gradually subside over the next few years. The ECB have also decided to keep PEPP measures due to increased uncertainty around the covid-19 variants. “Such a tightening would be premature and would pose a risk to the ongoing economic recovery and the outlook for inflation,” Lagarde added.
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WTI crude is back above $72 per barrel and looks to have enough momentum to take the highs again.
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The start of this week has been good for equities, as traders ease off their bearishness after last weeks rout. Fed Chair Powell will testify before the House regarding the Federal Reserve’s Response to the Coronavirus Pandemic tomorrow and this maybe a chance for him to walk back some of the Hawkishness that the market has perceived from the latest FOMC meeting. In the presser he did stress that everything should be taken with a large grain of salt, so I imagine he may wish to stress that point again. The Nasdaq is holding prices above the day’s open and hovering around all-time highs. Of the 3 major US indices the Nasdaq did not react with as much volatility and if the prices were to drop this maybe the next indication of a bigger move down for them all.
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The weakening in the US dollar has been good for the British pound. Cable is trading under the 20 and 50 daily ema’s but has risen above $1.39. This week is the Bank of England’s monetary policy meeting so there could be a new move lower that day if the governor is worried about the rise of the Delta variant and the continued lockdown measures. But equally, if the BoE follow the Fed and give a little indication that they are more Hawkish, the GBPUSD could be testing the $1.41 again and back above the shorter moving averages in this continued uptrend. $1.369 and the daily 200 ema are currently support for the pair and the weakening dollar is doing its best at keeping the pound in this trend.
