US Dollar weakened against other currencies last week as Fed failed to convince investors on gradual rate hikes and weighed by weak inflation data as well as persistent threats from North Korea. Euro rose moderately due to soft dollar but still depends on ECB direction as ECB officials has recently stressed the policy will remain accommodative implying their concern about euro’s strength.
On the other hand, sterling fought back strongly last week and rose 2% against dollar due to soft Brexit with agreed 2 years transition. There are few important UK economy data scheduled to be released next week and if the data is good especially CPI and Average Earnings will definitely be tightening rate hike which will push GBP towards 1.3400 and beyond. Speech from BoE Governor Carney will shape direction of GBP as well.
We expect bearish view on euro against pounds after strong rejection from resistance with target level of 0.8840 and eventual retest of 0.8750 or even 0.8375 in long term.
This week key economic events:
