• The scenario outlined by the ECB at its latest meeting was not worse than the one drawn up in June, despite the fact that the economic data released in the meantime sent some signs of weakness. This should prompt the euro to react more to data, especially if disappointing. Today’s PMIs were better than expected for the manufacturing sector, but weaker for services. This sent the euro as high as EUR/USD 1.1219, well within the EUR/USD 1.11-1.12 range which has been prevailing for the last two weeks. Here, supports are at EUR/USD 1.1180-1.1150 and resistances at EUR/USD 1.1250-1.1280.

• GBP – Sterling also pulled back from its post-FOMC highs at GBP/USD 1.3121, dropping as far as GBP/USD 1.3030 and closing back in on EUR/GBP 0.8600 against the euro. In the next few days, focus will shift back to domestic data, in view of another potential BoE rate cut, as the central banks has indicated that it will cut rates before the end of the year if data stabilise at their post-referendum levels.

• Market prices already take into account this possibility, therefore barring major disappointments, sterling should manage to stay above its recent lows at GBP/USD 1.29-1.28 and EUR/GBP 0.86-0.87 against the euro. A good test will come next week with the CBI survey of the retail sector in September, that rebounded well last month, and with August consumer credit data, which on the other hand was affected by the outcome of the referendum.

• JPY – The yen also pulled back from its post-FOMC highs in the immediate proximity of USD/JPY 100.00, re-entering the USD/JPY 101 area. Save for major surprises from US data, downside should in any case remain contained to within the lows hit in the USD/JPY 102 area (EUR/JPY 114 against the euro).

majors, Currency Analysis, USD, EUR, GBP, JPY,fx trader, forex chart-1

majors, Currency Analysis, USD, EUR, GBP, JPY,fx trader, forex chart-2Source: Thomson Reuters and Intesa Sanpaolo elaborations

Asmara Jamaleh
Economist – Forex Markets
Intesa Sanpaolo Research Department