The GBP Under Pressure as the Markets Prepare for FED Talk, with the USD on the Bounce

It wasn’t the best day for the Dollar at the start of the week, with the lack of material macroeconomic data leaving the Dollar exposed to the less influential Chicago FED National Activity Index for July, which disappointed, despite an upward revision to June figures, leading the Dollar Spot Index down 0.36% on Monday, though it wasn’t just the data that weighed, with there being plenty of negative sentiment towards the Greenback.

We will see similar sensitivity today, with data out of the U.S including June’s house price index figures, perhaps the more relevant Redbook and August’s Richmond manufacturing and services index numbers scheduled for release this afternoon.

Aside from the Redbook numbers, the markets would tend to brush aside the less material data out of the U.S but, with markets having to wait until Thursday and Friday for the symposiums out of Jackson Hole, the lighter volumes have made the Dollar more sensitive than usual.

Going into the European open, the Dollar Spot Index was up 0.19% at 93.274, retracing Monday’s losses, while today’s stats could ultimately decide the fate of the Dollar through to the close, as the second half of the week approaches and attention shifts to the FED Chair and monetary policy.

Across the Pond, the Pound managed to stand its ground on Monday, with government papers released on Brexit having had limited impact, though with more papers due out through the remainder of the week, further responses from EU negotiators are likely, particularly with the British government looking to put a spin on its plans, and the tone of any response will need to be considered. EU negotiators have continued to point out that progress needs to be made on citizen’s rights, financial settlement and Ireland before other areas are discussed. The papers certainly didn’t focus on the EU’s three key areas of focus.

At the time of the report, the Pound was down 0.22% at $1.28722, with macroeconomic data out of the UK today limited to CBI Industrial Trend Order numbers for August. Forecasts are for orders to soften, which will be another negative for the Pound, as the positives for the Pound have continued to lessen in recent weeks, which suggests that the Pound will likely be under most pressure through the day.

Out of the Eurozone, macroeconomic data will be of interest this morning, with the ZEW economic sentiment figures due out of Germany and the Eurozone for August. The key number will be Germany’s economic sentiment number and, when considering two consecutive months of decline, a third will be a negative for the EUR this morning, ahead of the ECB’s Constancio who is scheduled to speak later in the day.

We wouldn’t expect any hawkish commentary from ECB members any time soon and, with today’s stats forecasted to be on the negative side, the EUR will likely remain under pressure through the day. At the time of the report, the EUR was down 0.22% at $1.179.