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GBP/USD trades at six week high.

By Alex Edwards

The pound rose to its highest level in six weeks against the greenback yesterday. The GBP/USD pair reached a high of 1.3121 on the back of U.S. dollar weakness. In the UK yesterday the Bank of England kept interest rates on hold at 0.75% on Thursday and highlighted greater financial market concerns about Brexit, a month after raising borrowing costs for only the second time in more than a decade. There wasn’t much else to take from the statement.

Looking ahead today and the macroeconomic calendar is empty with no scheduled releases. Bank of England’s Governor Carney is due to speak at the Whitaker Lecture in Dublin to discuss monetary policy, so we may get some price action on the back of this.

The United States Dollar Index (DXY) shed another 0.28% in overnight trading to open this morning at 94.54. The greenback lost a little ground after the CPI reading came in below expectations and also weakened after news of a trade dialogue between US Treasury Secretary Mnuchin and China.

Markets continued to trade in a relatively tight range throughout the day as the trade war between the US and China continued its dampening effect on sentiment. There wasn’t too much news on that front overnight but there was month-on-month core CPI and CPI reports to digest. Disappointingly for the USD, the numbers came in slightly lower than expected, leading to a broad sell-off in the greenback.

The Federal Reserve’s Bostic also added to the interest rate conversation overnight saying that the FOMC will wait and see the data before adding a fourth rate hike this year. The comments were interpreted as mostly neutral and had little effect on the exchange rate. Moving into the end of the week, the Greenback turns to its month-on-month retail figures for direction while also keeping an eye on any new trade headlines.

Thursday saw EUR/USD advance to fresh two-week highs as the pair touched 1.17 in early North American trading before fading. The ECB failed to surprise markets by deciding to keep interest rates on hold, with ECB President Mario Draghi reiterating that underlying economic strength in the Eurozone was supportive of the banks confidence in the inflation rate returning to their target level in the near term.

In outlining that the bank would remain accommodative with its monetary policy stance, Draghi didn’t adopt a hawkish tone as some were expecting, however the EUR still rallied against the USD throughout the press conference as the greenback suffered selling pressures on the back of the weak CPI read.

The aussie found its feet on Thursday following a positive jobs report. The highlight of the report was the Australian economy adding 44,000 jobs against an expected 18,000. The Australian dollar jumped significantly on the news to test the key 0.72 level but failed to break through.

The shift in sentiment was also assisted by off-shore forces, as the USD weakened following a poor CPI result.

The Canadian dollar firmed to a two-week high against its U.S. counterpart on Thursday reaching an overnight high of 1.3025 on the back of weaker-than-expected U.S. inflation data, offsetting a pullback in crude oil prices. The loonie has been boosted this week by optimism that a deal to renew the North American Free Trade Agreement will be reached and a jump in the price of oil, one of Canada’s major exports.

Looking ahead today and the macroeconomic calendar is empty with no scheduled releases.

From a technical perspective, the USD/CAD pair is currently trading at 1.2999. We continue to expect support to hold on moves approaching 1.2980 while now any upward push will likely meet resistance around 1.3025.

The NZD opens higher against the USD as weaker than expected inflation numbers from the World’s largest economy forced the USD lower. The NZD/USD pair did rise as high as 0.6590 after the release, however further twitter commentary from President Trump regarding the Chinese trade situation hurt both the AUD and NZD units.