China Stimulus Gives EMFX A Lift

Impact on GBP: Pound Sterling surges, eyes year-to-date high as Dollar weakens

The Pound Sterling continued its rise against the US Dollar on Tuesday, despite a quiet economic calendar in the UK. In the US, a sharp drop in consumer confidence, driven by concerns about the labour market, weakened the Dollar and boosted other currencies. GBP/USD is trading at $1.3388, up over 0.30%.

From a technical standpoint, the GBP/USD has cleared the top of an ascending channel, about to challenge the year-to-date (YTD) high of $1.3398, shy of the $1.3400 handle. The Relative Strength Index (RSI) favours buyers despite breaking above the 70 mark, seen as overbought territory. However, this could exacerbate a leg-up, before retreating to lower prices.

No Major Data

Impact on EUR: EUR/USD Rebounds as China stimulus boosts sentiment; SNB rate decision in focus

After a shaky start to the week, EUR/USD has rebounded. China's reflation efforts, along with yesterday's weak US consumer confidence data, have certainly contributed to this move. With little scheduled on the European calendar today, range-bound trading in EUR/USD seems probable. However, the pair staying above $1.1100 is a positive sign for modest EUR/USD bulls. 

Elsewhere, general consensus is for a 25bp rather than 50bp SNB (Swiss National Bank) cut. Primarily because the SNB has such little room to manoeuvre on the downside. Given that the market is pricing a 37bp cut this Thursday, EUR/CHF could sell off if a 25bp cut is seen. 

No Major Data

Impact on USD: Dollar softens amid China stimulus and US slowdown signals

The Dollar weakened slightly yesterday as Chinese monetary stimulus boosted commodity markets, providing support to many emerging market currencies. It remains uncertain whether China's stimulus will have a lasting impact on global forex markets. 

However, signs of a U.S. economic slowdown continue to build, and investors appear to be adopting a more bearish stance on the Dollar. U.S. consumer confidence unexpectedly fell sharply yesterday, catching the market off guard. This is particularly significant, as the U.S. consumer has shown remarkable resilience for an extended period. Today’s U.S. calendar features only August new home sales data, but the expectation is that the Dollar will remain on the softer side ahead of the key event of the week: Friday’s core PCE deflator for August. A low reading, around 0.1% month-on-month, could push the Dollar down further.

No Major Data

Get More Value for Your Business with VFX

Need solutions for your Business’ foreign exchange needs? 

Stay up to date with all of the latest currency news, our daily market updates provide insight into major currency movements helping your business make international transactions at the right time.

At VFX, our team of expert brokers supports businesses in navigating the ever-changing currency market every day, ensuring that potential FX risk is managed through top-of-the-art data, analytics, and tools. 

If your business is looking to mitigate FX risk, then please contact our team today or call +44 (0) 20 7959 6900.