22/07 – Dollar cannot catch a break

GBP: Pound pushed onwards

EUR: Exuberance continues

USD: Losing hand over fist

Sterling

Sterling continues to rumble higher seemingly without a care in the world but those looking to extract further value from the pound must be aware that these gains have very little to do with what is going on domestically in the UK. The pound’s outperformance is purely a function of a weaker USD and a wider push higher in risky assets.

With that in mind headlines overnight in The Telegraph that the UK is “close to abandoning hope of Brexit trade deal” have been taken as political posturing but belie the wider belief that we are not moving any closer to an agreement on Brexit and once that becomes fact, sterling is set to take a leg lower.

In the short term, we are looking for Friday’s retail sales to trip sterling up from these levels.

Euro

So much for our story of EURUSD weakness. While the euro did weaken against most other G10 currencies, the single currency pushed higher to its highest since January of last year against the USD. The next target for those wanting the pair to push even higher is 1.1570 which could easily fall today if the wider risk environment stays supportive.

We are also looking for GBPEUR to remain rangebound.

US Dollar

The dollar cannot get a break and the last thing that it needed following days of higher risk tolerance and good news elsewhere was a press conference from President Trump. To be fair, what Trump said needs to be heard by some within American society but leaves the US as the only country wherein they are warning citizens that the situation will get worse before it improves.

This feeds into our continued belief that the lack of global recession fears alongside outsized US stimulus and USD liquidity should keep the dollar on the back foot for a while now. It needs either virus or economic data to turn positively in the coming sessions for a rebound.

Elsewhere

Our calls for a breakout for the CAD have come true with higher oil prices and a weaker USD allowing the pair to fall to its lowest level for 5 weeks. We think this move has legs and we could be talking about a return to the 1.30 level in the coming months.

Have a great day.

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Jeremy Thomson-Cook

Jeremy Thomson-Cook

Jeremy has over 13 years experience working in the FX industry. As a specialist in political risk mitigation and currency hedging, he regularly advises clients on the day-to-day moves of the markets and the implications of fiscal and monetary policy on international businesses.