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GBP remains firm on this week

GBP remains firm on this week

On the FX markets, the Euro broke the $1.31 level but failed to hold on to gains as the US dollar remains well supported and currently trades around $1.3070 this morning. The recent turnaround in the dollar’s fortunes looks to have been driven primarily by a shift in market expectations that further quantitative easing in the US is now less likely. Greater confidence among investors about the outlook for the US economy has helped boost US equity market.

A stronger US dollar and a rising US equity market might suggest that the traditional relationship between risk appetite and the USD has broken down, (risk-on = dollar down and risk-off = dollar up).

GBP/EUR has found itself relatively range bound with both currencies trading blows in negative news; there appears to be little direction but GBP seems to have the upper hand for the time being.

GBP will experience some early positioning next week as we look to the Bank of England minutes on Wednesday morning followed by the UK budget.

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