USD Selling Persists Prompting Lift in GBP and EUR - US Market Open

2018-09-25 13:30:00

MARKET DEVELOPMENT – USD SELLING PERSISTS, GBP AND EUR BENEFIT

USD: The US Dollar is on the backfoot yet again despite to continued push higher in US yields, in which the 10yr is above the YTD closing high at 3.11%. The rise in US yields ahead of the FOMC rate decision suggests that markets could be bracing themselves for a hawkish Fed meeting. With a hike pretty much a done deal and markets pricing in an 80% chance of another hike in December, eyes are on the statement and dot plot projections.

EUR/GBP: Both the Pound and Euro are benefitting from the softer USD, while the latter also remains buoyed by President Draghi’s hawkish comments regarding core inflation, despite the ECB Chief Economist, Praet, downplaying Draghi’s comments. Although, these comments are not entirely new, it does however, imply that the ECB are growing in optimism that Euro-Area core inflation will be on an upward trend. As such, the Euro is hovering around 1.18, while GBP continues to claw back from Friday’s sharp losses.

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IG Client Sentiment: GBPUSD Chart of the Day

Data shows 59.2% of traders are net-long with the ratio of traders long to short at 1.45 to 1. The number of traders net-long is 2.0% higher than yesterday and 81.2% higher from last week, while the number of traders net-short is 12.6% higher than yesterday and 20.4% higher from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests GBPUSD prices may continue to fall. Positioning is less net-long than yesterday but more net-long from last week. The combination of current sentiment and recent changes gives us a further mixed GBPUSD trading bias.

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