There’s potential for a spike in volatility ahead for the British pound with the BOE statement right around the corner. And with economic updates from the Euro area as well, EUR/GBP may be the best bet for quick pip opportunities.
Before moving on, ICYMI, today’s Daily U.S. Session Watchlist looked at a consolidation pattern on EUR/USD ahead of U.S. economic updates, so be sure to check that out to see if there is still a potential play!
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Fresh Market Headlines & Economic Data:
Fed Vice Chair Clarida anticipates rate hikes starting in 2023, sees upside risks to inflation
Private companies added 330,000 jobs in July, according to ADP, far short of the 653,000 estimate
Bipartisan infrastructure bill inches through Senate as Schumer pledges to stay until it passes
U.S. services sector growth accelerates despite supply constraints
Gold falls as US services data, comments from Fed’s Clarida weigh
Growth of German business activity surges to new record in July
Eurozone grows at fastest rate since June 2006 – IHS Markit Eurozone Composite PMI
U.K. service sector recovery slows again in July, while inflationary pressures hit new record high
Japan warns of unprecedented COVID spread as cases hit record in Olympic host city
Upcoming Potential Catalysts on the Economic Calendar
Australia Trade Balance at 1:30 am GMT (Aug. 5)
Germany Factory Orders at 6:00 am GMT (Aug. 5)
France Industrial Production at 6:45 am GMT (Aug. 5)
Euro area Construction PMI at 7:30 am GMT (Aug. 5)
ECB Economic Bulletin at 8:00 am GMT (Aug. 5)
U.K. Construction PMI at 8:30 am GMT (Aug. 5)
Bank of England Interest Rate Decision at 11:00 am GMT (Aug. 5)
If you’re not familiar with the forex market’s main trading sessions, check out our Forex Market Hours tool.
What to Watch: EUR/GBP
On the one hour chart above of EUR/GBP, it looks like the market is slowly working its way back into the longer-term downtrend after a short-term bounce last week. It’s not quite back at the swing low area around the 0.8500 major psychological level, but if it gets there, the question is will we see fresh lows or will buyers take control again?
That question will likely be highly reliant on the upcoming big event risk of the week for Sterling traders: the latest monetary policy statement from the Bank of England. And this week is Super Thursday, which means we’ll get the meeting minutes and their quarterly Monetary Policy report as well.
Expectations are for the BOE to hold off on policy changes, but it’s likely they will update their economic growth and inflation forecasts for the rest of the year. If this is the case or if we see more members than one vote for a reduction of QE policies, Sterling bulls may take EUR/GBP and possible even take the market beyond the 0.8500 major support area. Also, if we see the market bounce before or after the event to the short-term resistance area of interest between 0.8530 – 0.8550, then we’ll be on the look out for bearish reversal patterns before considering a short position.
Of course, if the BOE disappoints Sterling bulls with cautious rhetoric and hints that may be taking a step back due to the recent spike in covid-19 cases around the globe, then we may see a bullish spike in the pair as this would surprise the markets. After a break of the falling highs pattern, we potentially could see a move to 0.8570 – 0.8600, potentially similar to what we saw in June after the BOE hinted on inflation concerns at their last statement.
