Coverage of the currency markets with a focus on the drivers and outlook behind the British pound, euro and US dollar.
Current Levels
- Converting pounds into euros: 0.46 pct higher on a day-to-day basis at 1.3947.
- Converting pounds into dollars: 0.25 pct lower at 1.4872.
- Converting euros into dollars: 0.66 pct lower at 1.0667.
Note these are spot levels, your bank or payment institution will affix their own spread for international payments. It is possible to realise up to 5% more currency in some instances by using an independent. Learn more.
The British Pound Today: Fundamentals are Solid
The afterglow of the previous week’s heavy economic docket will likely prove supportive to the UK currency through the remainder of the month.
We stand apart from other media outlets who we see crediting election uncertainty for recent moves.
There is little empirical evidence to suggest this is the case. That said, volatility will ultimately pick up in early May when the election takes place and the results are made known.
The Pro’s:
Britain's economy created the largest number of new jobs in nearly a year and unemployment hit its lowest rate since mid-2008 market data showed on Friday.
Prime Minister David Cameron hailed the numbers, which cover the three months to February, as underlining his government's "jobs miracle".
The data helped the pound hit its highest level in nearly four weeks against the dollar in a move that co-incided with a general softening in sentiment towards the Greenback.
The Technical Outlook:
For the pound to dollar exchange rate, strength is ultimately seen as temporary.
“GBP/USD’s spike higher faltered ahead of the 55 day ma at 1.5065 and eased back. We suspect that there is scope for a retest of the 2014-2015 downtrend at 1.5176, where we look for the market to fail. We view this move higher as a correction only,” says Karen Jones from Commerzbank.
Looking at the pound to euro exchange rate, the establishment of a tight range looks to be the name of the game until the elections come to pass.
We have found no analysts willing to back a strong move either way in GBP-EUR in the near-term.
We do however ultimately favour the GBP going into the second half of the year. That said, Danske Bank believe that the best rate achievable will be reached as early as June, this is something to be aware of.
Lloyds Bank tell clients that for GBPUSD 1.4850-1.4790 is support and 1.5150/1.5200 is resistance.
The Euro Rate Today
The EUR is going to take centre stage today with the ZEW survey this morning.
"With Germany still at the forefront of leading European data, the expectation is for a better number. If so we will look for the EURUSD to try to extend the recent gains towards the top of the range (1.0950-1.1100)," say Lloyds Bank Research in a briefing to clients.
Greece is still on the radar with the IMF having claimed that progress is being made, with the Washington-based institution ‘hopeful’ a solution can be found.
“However, these hopes look like they will have to stretch beyond Friday’s Eurogroup meeting, with sentiment in the region largely suggesting that there will be little in the way of formalised action by the end of the week,” says analyst Connor Campbell at Spreadex.
Tech Outlook
The EUR-USD looks capped at current levels and strength is not favoured by strategists owing to the underlying negative momentum seen in the markets.
“EUR/USD’s correction higher has reached its 5 month resistance line, this is located at 1.0842 currently. While capped here, an immediate downside bias will remain in place and the risk remain for a retest of the 1.0520/1.0457 recent lows. Loss of 1.0650 should be enough to refocus on the downside,” says Jones.
The Dollar Rate Today
The ultimate driver in global FX remains the US currency which is being boosted by demand ahead of an expected rise in interest rates pencilled in for the second half of the year.
We have seen demand for the USD wane on the back of some softer than expected jobs data as of late.
Nevertheless, the picture remains broadly pro-USD.
Trend strategist Phil Seaton at LS Trader says he is one retail trader who continues to factor in an extension of the upside in the USD exchange rate complex:
“The dollar index began the week moving higher to reach its highest level in almost a month, before moving lower and selling off for four straight days.
“There is short-term support for the index around 96, and a further support zone around the 94-95 level.
“There are, therefore, plenty of areas to support the long-term uptrend and to form a platform for further strength.
“The RSI, which often moves ahead of price, remains in the bull range, which we define as between 80 and 40. It will be interesting to see if the bull market support area on the RSI at 40 holds this week.”
