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Euro reaches five-year high versus Pound

Euro reaches five-year high versus Pound

Versus the Dollar, the Pound entered the beginning of yesterday’s New York session on a not so positive note, with fresh evidence supporting solid US services data which boosted the US currency. The Institute of Supply Management (ISM) non-manufacturing index bounded to 57.1 from a pre-month base of 51.4, which was 4.1 points above consensus.

The Pound experienced some volatility on Wednesday, with support seen at a 31-year low amid the start of the Tory conference and analysts’ suspicions that a “hard Brexit” may be on the cards. Resistance for the Pound versus the Greenback had retraced downwards from the previous day’s high. Strategist Eric Theoret at Scotiabank said that an increase in fear surrounding the underlying economic outlook of the Brexit negotiations would put pressure on the Pound as business struggles through the week.

Theresa May has moved away from her predecessor, David Cameron, to pave the way for an activist government. The aim is to promote a fairer, more people-focussed strategy to help all social classes and allow the government to play a better part in the lives of those living and doing business within the UK.

The International Monetary Fund (IMF) is expected to cut expectations for UK economic growth in the near future, as the we get closer to leaving the EU. This has put Sterling in a momentous dive and struggle for stability.

The Euro moved to a five-year high against the beleaguered Pound yesterday and reached a three-week high versus the Japanese Yen. This was reinforced by rising Eurozone bond yields. This came a day after the European Central Bank (ECB) had reported that it would possibly slow down its bond buying activities.

EURUSD kept its current range, with the bears ensuring control amid ever-increasing demand for the Dollar across the board. The Euro also appeared to find support from better than expected German factory orders data.

There is a large focus on the ECB monetary policy accounts whereby market participants are wanting to see if the policymakers are indeed considering a QE taper.

The Dollar stuck to thin ranges versus its rivals in yesterday’s overnight trade ahead of this week’s Nonfarm payrolls report that may well reinforce expectations that the U.S. Federal Reserve will raise interest rates by the end of the year. Supporting the Dollar, Chicago Fed President Charles Evans said he would be “fine” with increasing U.S. interest rates by December if U.S. economic data remained firm.

Yesterday’s economic data from the States was buoyant as services sector activity offset a worse than expected print on private sector jobs growth ahead of Friday’s jobs report. The monthly employment figures are expected to show that 175,000 jobs were added in September, according to the median estimate of 100 economists polled by Reuters. Market participants will also look for any upward revision to August’s weaker than expected gain of 151,000 jobs.

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