GBP Resilient Post-Brexit; USD Fragile Despite Rebound

Talking Points:

– Rising prices in UK keeps BOE looking for a rate hike, preventing Sterling from slipping now that Brexit has been triggered.

– Seasonality for Euro in Apr is bullish, while it is bearish for a US Dollar; French elections will be a vital factor.

– Crowd positioning in EUR/USD has fast neutralized after a Euro’s decrease this week; traders now 50% long, 50% short.

The final trade day of a week, month, and entertain should move about a call of positioning rebalancing, for those that have nonetheless to do so over a past few days. It seems a bit of rebalancing competence have already taken place, with a Euro, for example, carrying given behind most of a gains amassed during a initial 3 weeks of March. Similarly, a US Dollar, that had been generally diseased given a Mar 15 FOMC meeting, has seen an strident miscarry given Tuesday.

Yet as we spin a calendar into April, there are several overarching themes in play that will expected strive themselves over new rebalancing cost action. From a seasonality perspective, Apr has been a third-worst month of a year for a DXY Index over a past 20-years, while Apr has been one of a best months of a year for a British Pound (the best) and a Euro (the third-best).

For a British Pound, a resiliency shown given Article 50 was triggered competence assistance disband fears of a strike to a UK economy. It is critical to keep in mind what a BOE pronounced during their Mar process meeting, that was some-more or reduction that they’re not going to endure an acceleration overshoot. Recent cost information out of a UK suggests acceleration will run aloft over a entrance months, creation some-more hawkish explanation – and even a rate travel – a really clever likelihood. Sprinkle in a vast suppositional brief position futures traders have for a British Pound, and all of a remarkable there are several factors backing adult that could indicate to a brief fist in April.

For a Euro, cost movement has been less-than-kind as rumors emerged that a ECB was not happy with a market’s interpretation of their Mar process meeting. Certainly, a weaker acceleration information a past few days competence have given a Governing Council a bit of respirating room to get a marketplace to behind divided from a thought that a ECB is looking to finish in a near-term. Yet with a backdrop of generally improving mercantile data, should a French elections spin out benign, signs are indicating to a leg aloft by a Euro opposite a board. While futures traders aren’t carrying a poignant brief position during benefaction time, it is really expected that a Marine Le Pen detriment in a French presidential choosing (voting on Apr 23 and May 7) would means a common whine of service in FX markets in a form of a Euro rally.

In a near-term, looking forward to subsequent week, a early days of a new month will move about a standard high volume of “high” rated eventuality risk. The RBA process assembly on Tuesday, a Mar FOMC mins on Wednesday, and a Mar US Nonfarm Payrolls news on Friday will certainly move about some-more volatility.

See a above video for technical considerations in DXY Index, EUR/USD, USD/JPY, Gold, and GBP/USD as we spin a calendar into April.

Read more: DXY Index Finds Support, Bullish Wedge Taking Shape?

— Written by Christopher Vecchio, Senior Currency Strategist

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