General market theme
The lack of any significant price action in the major currencies continued yesterday as investors remain cautious in their trading while the situation with Deutsche Bank continues making headlines. As long as the issue is not being resolved one way or another the bias will remain on the cautious side as market participants fear a much broader problem should the banking giant collapse and rumors are already mentioning other key institutions across Europe. Given that environment many analysts believe that the current easing efforts from major central banks around the world will continue and could possibly force the Fed to hold back on tightening further this year. Even though it’s still too early to suggest something like this we need to keep it in mind as we move forward.
Price action highlights
The Euro remained range-bound for yet another day as traders are keeping their feet out of the water and the 1.1200 level seems to be holding for now but should the situation in German take a turn for the worse the rate will take a hit. Given the current bias with Deutsche Bank’s problems it’s kind of a wonder that the Euro is still holding on which indicates that investors are hopeful of a solution but should there be limited progress on that front then a flight towards safer havens will put the Euro under pressure with the 1.1120 lows being the next area of interest.
The Cable dropped lower again yesterday and traded below the 1.3000 level once more as the banking crisis in Europe along with the recent Brexit-related concerns are weighing down on the UK currency. It will be interesting to see how the Pound will react as it moves closer to the 1.2900 support base and given that the decline has limited momentum we need fresh stimulus for the support to be penetrated. With limited events on today’s calendar and being the end of the week we don’t expect too much of a price action today in the Pound.
Focus of the day
Eurozone inflation levels and US Personal Income and Spending reports are the most important events of the day ahead and we wouldn’t call them market-moving in any sense. We believe that investors will look to protect their portfolios at the end of the week and probably not get into too much trading today so volatility should remain at low levels.