GBP/USD, EUR/USD Remain Technically Weak as 'Hard Brexit' Fears Persist
- European Council President Tusk says 'Hard Brexit' is the only option.
- See the DailyFX economic calendar for Friday, October 14.
The US Dollar (via DXY) is churning ever-so-slightly higher thanks to more weakness in EUR/USD this morning, but it's evident this strength isn't consistent. A look at the equal-weighted USDOLLAR Index shows only a small gain, due in large part to AUD/USD offsetting US Dollar strength elsewhere.
In a sense, today's price action reveals the US Dollar's dilemma: without Fed rate expectations pushing higher, there is little fuel to keep bullish optimism intact. After all, the Atlanta Fed's GDPNow Q3'16 growth tracker has fallen from +3.8% to +2.2% since early-August.
As such, with Fed rate expectations for December abating slightly to 66%, the only place the US Dollar is finding appeal is versus currencies embattled by policy challenges: the Japanese Yen and the BOJ; and the Euro and the British Pound for Brexit. Otherwise, with commodities' prices firming, currencies like the Australian Dollar and the Canadian Dollar have found renewed demand versus the greenback; both AUD/USD and USD/CAD remain in their multi-week consolidations.
With respect to the Euro, it seems a period of 'catch up' is underway after seemingly being immune to Brexit-related concerns. The Euro still isn't in its own driver's seat, and it looks more and more like the Euro is being overwhelmed by a myriad of small concerns piling up in the short-term.
--- Written by Christopher Vecchio, Currency Strategist
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