Despite the better than expected US deficit, the dollar failed to build on Thursday’s rally, and ended the week on a weak footing. This could be symptomatic of a change in market sentiment, with good news being absorbed, and bad news driving price.
Plenty of data both sides of the pond this week, starting with UK Producer Price Index and House Prices this morning (09:30) and some important US data tomorrow.
Sterling managed to hold above the crucial 1.4500 level, with ECB president Claude Trichet giving the Euro a jolt with negative comments about Euro growth. This has hit market expectations of a further rate rise, and therefore hurts the Euro. Prior to these comments it looked like the Euro was ready to break 1.4500, with good fundamental reasoning, as interest rate expectations converged (UK down, Euro up).
GBP USD – Support 1.7700 then 1.7512
Resistance 1.7809 then 17900
GBP EUR – Support 1.4600 then 1.4515
Resistance 1.4650 then 1.4680