Sterling reversing

A sombre end to the week as we digest the news of the attack in Nice. Stocks are opening broadly steady, whilst the yen has strengthened modestly into the European session. Looking elsewhere, we’ve sterling reverse nearly all of the gain against the USD seen in the wake of the MPC decision to keep interest rates unchanged yesterday. This is not wholly surprising, given that we saw a decent amount of short-covering in the wake of the announcement, together with a fairly strong expectation that policy will be eased next month. As such, we’ve probably seen a near-term top in cable for the time being, with the question likely to be what form further easing is going to take next month.

For today, we can expect to see relatively tight ranges on the majors. EURUSD remains in the post-Brexit move range and until we see a convincing break either way, we’re likely to see the tighter ranges holding, with the 2 week ATR (average true range) below the average for the year (that does make sense!). The Aussie looked more interesting, having again broken above the 0.7648 high seen on 24th June. We’ve yet to see a break on a closing basis, but if seen that should augur well for a more sustained positive tone. Note that US CPI is see 12:30 GMT, with further data seen later in the day, so this is where the main volatility risks lie.

Did you know?

U.S. President Richard Nixon is credited with enabling a free-floating currency system after ending the Bretton Woods Accord.

Word of the day
"Coincident Indicator" - An economic indicator that shows the current state of the economy of a particular area. The GDP, for example, is one of the most significant coincident indicators.
Pro Tip

Be wary of promises and bonuses. If something sounds too good to be true, then it most probably is.

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