As market sentiment began to sour yesterday, there is a bullish demand for the safe-haven USD going into today’s session. Looking at the US Dollar Index (DXY) charts, due to a bearish bias in EURUSD, it’s likely the DXY will surge. The DXY is an Index of the value of the USD relative to a basket of foreign currencies, most heavily weighted to the Euro by 57.6%. The Index goes up when the US Dollar gains strength when compared to other currencies and is pressured when the Euro strengthens. Despite hitting an intraday high of 1.1969 in yesterday’s trading session, the pair was unable to sustain those gains and had shed most of it’s upside by the close. The Euro’s outlook was positive in the morning due to better-than-expected Markit PMI preliminary estimates for June. The Eurozone as a whole beat forecasts by coming in at 63.1, and in Germany the Manufacturing Index improved to 64.9. German Services also beat expectations by jumping to 58.1 from 52.8 in the previous month.
Today’s focus for Sterling will be the Bank of England’s latest Interest Rate Decision at 12:00. The UK central bank is expected to maintain its current policy settings, leaving the bank rate at 0.1% and maintaining its Asset Purchase Facility (APF) at £895B. One economist notes that “Developments since the May meeting have been encouraging with UK growth receiving a boost from the re-opening of the economy. The most recent monthly GDP figure beat expectations to rise at its quickest pace since last summer at 2.3%. This will likely see the BoE reiterate its view that growth is expected to reach pre-pandemic levels over the remainder of this year.”
GBPUSD opened Wednesday at 1.3943 and as investors await today’s meeting for direction, the pair saw little price-action, closing the day at 1.3968.
GBPEUR also made subtle gains on the day, opening at 1.1688 and closing at 1.1691.
As for EURUSD, despite heightened volatility during the session, the pair closed not far off where it started. EURUSD started the day at 1.1928 and closed at 1.1946.