Excel Currencies Blog

It was truly a magnificent week for £-€ last week with mid-market briefly touching a new recent high of 1.19. It has now been 7-days that the pair has traded over 1.18 mid-market, not enough to call it a consolidation period, but certainly a very favourable one!

This week is a lot more tricky to navigate for those that didn't ride the wave last time out. Firstly, GBP v EUR is currently down 0.6% from last week's high point and that means there was/is a real chance that the pair was/is in overbought territory.

This happens when a sudden shock hits the market and both short and long positions are closed, causing a snowball effect. But what goes up, must come down and visa-versa. If and by how much overbought territory was reached will be found out this week and this will reflect in the volatility in the pair if UK data surprises on either the upside or down downside. 

UK inflation is expected to hit the BoE's 2% target this week after failing to get there last month. A sizeable drop in the core inflation figure is forecast too, which should be the nail in the coffin for an interest rate cut in August for the UK. More on that will be discussed at the MPC meeting on Thursday. PMI & retail sales round up an exciting week for UK/£..

EUR
Forget about Germany and the Euros, it's all about France at the moment in the Euro-Zone. Political uncertainty is bad business in financial markets and that is what France are in the midst of and why the Euro has been devalued of late.

Last Friday, credit agency Standard & Poor's cut France's credit rating from AA to AA-, citing larger than anticipated account deficits and political fragmentation. French government bonds are under pressure, as the polls suggest President Macron is set for a wipeout at the snap election and this is dragging the € down.

The dark clouds are rapidly forming above Macron and France with a financial crisis likely ahead. The debt to GDP ratio is expected to hit 110% next year as Macron's Government has failed to balance the books. What's more is the fiscal instability between having two parties as Prime Minister and President. The whole episode is extremely worrying for the EU's & Euro's future and the situation could quickly get out of control, which means the Euro will remain hypersensitive to any news on the subject.

USD
GBP v USD is currently trading at a 1-month low which is neither here nor there at this point. What is bad for France is bad for the UK apparently, as the Dollar had advanced against a basket of currencies being a safe-haven currency, following the French events..