The Forex market started to make its first real move this year this week as Monday saw the GBP (Great Britain Pound) opening sharply lower. The reason for the gap was attributed to rumors that Mrs. May, the U.K.’s Prime Minister, will opt for a “hard Brexit” stance on the recent divorce from the European Union.
In plain English, the U.K. is finally acknowledging it is not possible to access the single market if it is not respected the rules for it. Therefore, GBPT was all over the place at the opening on Monday.
The funny thing is that by the time the May’s speech came, today, the GBP surged across the board with the GBPUSD pair having one of its best days in quite some time. While the day is not over yet, the pair is trading around 1.24 at the moment this article is being written, up a stunning four figures since Monday’s opening.
There is no real reason as the U.K.’s stance should be a bearish one for the pound. It may have been boosted, though, by the fact that inflation in the kingdom has been released today as well and it showed a solid jump higher.
The move in sterling triggered some interesting correlations on other currency pairs. Risk-off seems to be the name of the game so far in the week as USDJPY and USDCHF are higher, meaning traders are finding protection in the JPY and CHF currencies.
So far it proves that Monday’s holiday in the United States was nothing but a consolidation before an aggressive move lower for the dollar, as Trump “intervened” as well. The future President of the United States claimed that the dollar is too high for what the country needs, and it is no wonder it is trading lower now.
If you think of the fact that this is only Tuesday, then the trading week is still young. The main events of the week are still ahead of us, as there are two important central banks due to set the interest rate for the next period: the Bank of Canada on Wednesday and the European Central Bank on Thursday.
Both of them are facing a tough decision due to recent events on the global scene, but the key for the trading week should stay with the Euro and Mr. Draghi. While there are clearly positive signs in the Eurozone, as inflation is picking up and unemployment drops, the core numbers are still fragile.
All Draghi can do is to reiterate the dovish ECB stance, and this should not help the EURUSD and Euro in general. Therefore, it may be that the current move higher in EURUSD above 1.07 is a nice place to fade the move, considering ECB in two days from now.