16 Jun 2014
Highlights so far, noting GBP/USD testing 1.70 - BMO
FXStreet (Guatemala) - Stephen Gallo, European Head of Currency Strategy at BMO Capital noted the highlights in current FX space.
Key Quotes
"The highlight of this morning in G10 was the quick stab above 1.7000 in GBP/USD>, but afterwards, activity diminished noticeably. The UK curve was still ‘flatter’ though, and this kept the GBP well supported."
"The most aggressive portion of weakness in short-term EUR rates appears to have passed, so some of the recent downward pressure on the EUR has subsided. ‘Risk-off’ dominated equities on Iraq tension, and the USD appeared to get a very slight lift in some places as a result."
"Things began this week in USD/CAD pretty much right where they left off: rate differentials say the pair is moderately undervalued, but the underlying bid in the oil price is weighing, as the sensitivity of the pair to oil has gradually moved up. However, the early portion of the London morning was marked by a 35-pip push up USD/CAD on no apparent shift in the oil price."
"What seems a more likely factor for that push up in USD/CAD is that EURCAD and GBP/CAD have both found some near-term support. More so than oil, equities or even rates, EUR/CAD has been the most important driver of USD/CAD in recent weeks."
"We don’t expect the oil price to supersede rates as the more important driver of USD/CAD in the very near-term, but the former still needs to be watched closely. We look for the 1.0800-1.0830 area in the pair to be very good support, but relative to where we saw things at the start of last week, the oil factor combined with the rate differentials factor has us leaning towards a ‘neutral bias’ to USD/CAD for now."
Key Quotes
"The highlight of this morning in G10 was the quick stab above 1.7000 in GBP/USD>, but afterwards, activity diminished noticeably. The UK curve was still ‘flatter’ though, and this kept the GBP well supported."
"The most aggressive portion of weakness in short-term EUR rates appears to have passed, so some of the recent downward pressure on the EUR has subsided. ‘Risk-off’ dominated equities on Iraq tension, and the USD appeared to get a very slight lift in some places as a result."
"Things began this week in USD/CAD pretty much right where they left off: rate differentials say the pair is moderately undervalued, but the underlying bid in the oil price is weighing, as the sensitivity of the pair to oil has gradually moved up. However, the early portion of the London morning was marked by a 35-pip push up USD/CAD on no apparent shift in the oil price."
"What seems a more likely factor for that push up in USD/CAD is that EURCAD and GBP/CAD have both found some near-term support. More so than oil, equities or even rates, EUR/CAD has been the most important driver of USD/CAD in recent weeks."
"We don’t expect the oil price to supersede rates as the more important driver of USD/CAD in the very near-term, but the former still needs to be watched closely. We look for the 1.0800-1.0830 area in the pair to be very good support, but relative to where we saw things at the start of last week, the oil factor combined with the rate differentials factor has us leaning towards a ‘neutral bias’ to USD/CAD for now."