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Sterling hanging in there but will Yellen light the touchpaper?

Sterling hanging in there but will Yellen light the touchpaper?

Sterling recovered from a poor Asian trading session yesterday, moving up from 1.3080 to 1.3154 against the Dollar. Selling pressure on the UK currency was maintained, however, as Cable (GBPUSD) fell back to 1.3115 where it opened this morning. Dovish comments from Monetary Policy Committee member Weale have meant that the market consensus expects a UK interest rate cut next week.

UK GDP data will be released today, forecasted at 0.5% for Q2. There is uncertainty surrounding how much impact this will have on the currency market, however, as August’s rate decision is so close.

There was a plethora of strong data from the US yesterday lead by a consumer confidence figure that beat expectations to print at 97.3. The Richmond Fed index followed suit, increasing to 10 for July from -7 previously, along with new home sales increasing to its strongest figure since early 2008. This shows that there is an overall positive outlook for US economy. However the Dollar failed to make significant headway as there is tentative trading ahead of tonight’s Fed statement.

Expect volatility for the Dollar today with core durable goods orders data due for June. This data shows the level of production from manufacturers, whereby a positive figure will add to the positive outlook in America. This will be followed by the Federal Open Market Committee (FOMC) Interest Rate Statement, where all eyes have been this week. The statement will be examined closely by traders in order to assess the chance of a rate increase by September. A notably dovish Fed tone would undermine the US currency as the Euro held close to 1.1000 on Wednesday.

The Euro weakened versus Sterling during yesterday’s European trading session by 0.4%.
The single currency ended the day at around the 1.1965 levels versus its neighbour and continued to flow in narrow ranges as it looks to pass resistance pressure at around the 1.2000 area. The German GFK consumer confidence survey is due this morning.

Data to Watch: 9am EUR M3 Money Supply YoY. 9:30am GBP Prelim Q2 GDP. 1:30pm USD Core Durable Goods Orders MoM. 3pm USD Pending Home Sales MoM. 7pm USD FOMC Statement, USD Interest Rates.

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