EUR GBP

EUR/USD continued an aggressive sell-off but EUR/JPY put in a clean breakout from an ascending triangle. Meanwhile, EUR/GBP has set the initial steps for a possible bounce.

Despite international factors, domestic concerns remain for the German economy, discouraging us to be very bullish on the EUR/USD forecast, despite the dollar’s overall bearish trend. Indeed, looking at euro crosses such as the EUR/GBP, which is approaching its post-Brexit lows, you can see that there is very little underlying strength for the euro and that the EUR/USD’s weakness is masked by a weak US dollar right now.

We have seen further widening of the bond yield spreads between German and French debt today. Investors are clearly worried about a sustained period of political uncertainty and are therefore seeking haven assets and reducing their risk exposure.

Euro pairs gapped lower at Monday's Asian open on news of Macron's snap election following painful election results for the left. EUR/USD broke beneath its 200-day EMA and EUR/GBP fell to a 22-month low.

A quick look at the charts suggests the British pound might be nearing a burst of energy, and that could be beneficial for GBP/USD bulls or EUR/GBP bears.

Gold and oil were higher in Monday’s Asian session in response to weekend news that Israel had declared war against Hamas. With the potential that this could spread into a wider Middle East conflict, gold sucked in safe haven flows whilst oil was higher on supply concerns.

With the US dollar having fallen for three days ahead of today's PCE inflation report, we're going to need to see some soft numbers for the US dollar to move materially lower from here. So could that could leave an upside surprise and subsequent rally for the US dollar if inflation is hotter than liked? Either way, 1.0900 is likely to be pivotal level for EUR/USD today, and a host of European data points also puts EUR/GBP into focus ahead of the inflation report.

GBP/USD looks to US data for clues on the Fed’s next move. EUR/GBP holds steady ahead of German inflation.

Rising yields and a stronger US dollar weighed heavily on EUR/USD yesterday, which came very close to a break of key support. And if price action on EUR/GBP is anything to go by, a breakdown on EUR/USD may be on the horizon.

The US had their credit rating downgraded for their second time in history by Fitch on Tuesday night, although the relatively muted market reaction suggests there may not be much of a bearish follow-through. With that said, perhaps Asian trade is not quite sure what to make of the headline and we’ll see the real commotion in today’s European and US sessions.

EUR/GBP rises ahead of the BoE rate decision. USD/JPY is supported by BoJ-Fed divergence.