Well, as I suspected on Monday, it sure has been a volatile week for the pound with the
GBPUSD moving rapidly at times on each and every political soundbite and parliamentary
voting outcome. The price has both surged and slumped at times during the past 5 days,
swinging in between a low of 1.2949 posted on Monday, to a high of 1.3381 set on
Wednesday.
However, the GBPUSD has steadied somewhat over the past 24 hours. Of course all those
GBPUSD moves have in turn helped the GBPEUR swing pretty rapidly at times too, with the
price range for the week so far set at 1.1526 to 1.1803. The high point was reached twice
during the week and now represents a level that could define a technically important
interim ‘double top’ which I can show you via a chart below.
As you can see, the two-time price spike to 1.18 has been met with strong selling each time
and that has forced it back on both occasions and now its jostling around 1.17 this morning
where it seems to be settling for the time being, but unless there is another push past 1.18,
then from a purely technical perspective, there is a risk of a relapse back down through
1.1550 from here.
As far as all the Brexit developments are concerned; whilst its no clearer where exactly
things will end up, it is surely as much in the hands of the EU now as to how things pan out
over the next fortnight ahead of the March 29 deadline. Clearly, the UK wants to delay the
process, but as I said before, that can only be achieved if there is a unanimous vote of
approval by the 27 EU member states.
In this respect I noted on social media during the week, that any veto of such approval
might just allow Teresa May another chance to get her bill through on a 3 rd or perhaps even
a 4 th attempt. On the other hand, unless an A50 extension is granted, it also keeps live the
prospect of a no deal exit- as you were then I suppose! Consequently, the pound now looks
quite evenly poised and highly pivotal to me.
Elsewhere the dollar has certainly taken a back seat and along with the JPY, has languished
as the week has progressed. Indeed, to reaffirm what I have previously noted, regarding
whether or not the 97.71 level on the USD index would cap the upside; I want to show you a
chart of that as well today, so you can see the price action I am referring to.
On this chart I have marked the 3 points at which the USD index has stalled at 97.70 over
the past 6 months, and so clearly we have a triple top in place here now and that is surely
still capping the upside for the dollar overall and readily explains why the EURUSD held onto
that important support area around 1.1187 last week. Whilst I still see no fundamental
reason for that, I also have to pay close attention to what the technical picture is indicating.
So, both levels could easily define the limit of the dollars gains for Q1 as we head ever closer
to the end of the period. Indeed, it could be that this also sets the tone for the dollar in Q2
as well.
However, as to how the second quarter pans out for the dollar and the EUR will largely be
data/event dependent from now on I think. Within that rests all the current topical issues
such as the trade talks with China and what developments occur on the North Korean
peninsular and how those and other upcoming news/events impact capital flow and risk
appetite generally.
As to how and what capital actually flows from one place to the next is slightly less clear
right now, but the equity markets generally are continuing to reap the benefit of what
certainly looks like a more globally benign interest rate outlook. That’s perhaps immediately
understandable, but slowing growth in Europe, China and elsewhere is surely not something
to underpin those markets in the longer term.
Important Economic Releases Due today
15/03- 10.00am Eurozone- Final CPI inflation reading for February
15/03- US University of Michigan March Consumer Sentiment