GBP: EUR/GBP Demand Sees GBP Second Worst Performer in G10 This Week

Jul-11 11:17

Softer GBP looks like a function of firm EUR/GBP demand here, with the cross breaking to new weekly highs (topping intraday resistance at 0.8643).

GBP remains weaker following this morning's second consecutive month of negative growth in May, the release of which clearly drew considerable market interest: GBP futures saw interest of over 1,700 on the print - the biggest volume surge since the July 3rd NFP release. The latest spell of weakness saw a not unimpressive 1k contracts trade inside three minutes for a cash equivalent of $84mln.
It's not only this morning's data print that's triggered the sell-on-rallies theme in GBP, but the extension of uncertainty around the government's revenue-raising options into the autumn budget. Reeves' options seemingly narrowed further today as the Chancellor was forced to cancel any planned changes to ISA allowances this morning after industry backlash. Reeves gives her Mansion House speech (as does BoE's Bailey) on Tuesday next week.
For GBPUSD, spot has recently tested the lowest levels of the week below 1.3526. The market will concentrate on key 50-day EMA support which intersects today at 1.3481 and below here, a key trendline drawn from the January lows comes in just above the 1.34 mark.

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Jun-11 11:08

On the commodity front, a bullish theme in Gold remains intact and the latest pullback appears corrective. Medium-term trend signals remain bullish - moving average studies are in a bull-mode position, highlighting a dominant uptrend. A resumption of gains would refocus attention on $3435.6 next, the May 7 high. A break of this hurdle would strengthen bullish conditions. On the downside, the next support to monitor is $3245.6, the 50-day EMA.
In the oil space, WTI futures have traded higher this week, extending the current bull cycle. The contract has cleared the 50-day EMA, signalling scope for an extension towards $67.14 next, the 76.4% retracement of the Apr 2 - 9 bear leg. It is still possible that the recovery since early May is a correction. MA studies are in a bear-mode position, highlighting a dominant M/T downtrend. Support to watch lies at $59.74, the May 30 low. A break would highlight a potential bearish reversal.

Jun-11 11:07

Just a reminder that Chancellor Reeves will begin delivering the Spending Review shortly after 12:30BST.
There shouldn't be new money allocated to spending in this - it will be an allocation of the "envelope" of previously announced departmental spending which was last updated in the March Spring Statement.
Capital spending for 5 years will be detailed (going into the next parliament) with current spending for 3 years (taking us to the end of this parliament).
From the markets side, we think that the biggest concern is that the costings aren't credible - which might take some time to have a big market impact, but if markets view the figures presented as unreasonable gilts and the pound could be vulnerable here. We discuss this a little more in the Gilt Week Ahead here.
From the political side, this is a hugely important event that will set the economic tone for the rest of the parliament and for Chancellor Reeves' remaining term. We look more at the political implications in our preview here.

Jun-11 11:00

In FX, EURUSD is unchanged and continues to hold on to the bulk of its recent gains. The breach of 1.1419, May 26 high, confirmed an extension of the current bull cycle and sights are on 1.1573, the Apr 21 high and bull trigger. MA studies are in a bull-mode position, highlighting a dominant uptrend. Support to watch is 1.1232, the 50-day EMA. A clear break of this average would undermine the bull theme. Initial support is 1.1356, the 20-day EMA.
Trend signals in GBPUSD remain bullish and the latest pullback appears to be corrective. A fresh cycle high last week, confirmed a resumption of the uptrend and an extension of the price sequence of higher highs and higher lows. This opens 1.3681 next,the 1.500 projection of the Feb 28 - Apr 3 - 7 price swing. Support at 1.3466, the 20-day EMA, has been pierced. A clear break of it would suggest potential for a deeper correction and expose the 50-day EMA, at 1.3306.
A short-term bull cycle in USDJPY remains in play - for now. The latest recovery is considered corrective and the trend condition is bearish. A resumption of weakness would open 142.12, the May 27 low. A clear break of this level would confirm a continuation of the bear leg and open 139.89, the Apr 22 low. MA studies remain in a clear bear-mode position too, highlighting a dominant downtrend. Key short-term resistance is 146.28, the May 29 high.

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