Forex: Best Euro Exchange Rate Rally but is it Time to Take Profits in EUR/GBP?

August 22, 2017 - Written by Ben Hughes

STORY LINK Forex: Best Euro Exchange Rate Rally but is it Time to Take Profits in EUR/GBP?

The mid-week session finds the euro to pound exchange rate quoted at 0.91689 (August 23, 07:30 GMT), having seen little movement during the previous day's trade.

The best euro rates seen against the pound sterling and US dollar remain vulnerable according to several leading foreign exchange institutions.

All eyes are on Friday’s Jackson Hole risk with a pair of speeches from Fed Chair Yellen (10am ET) and ECB President Draghi (3pm ET).

ECB Summer Recess almost over for Euro traders

The Summer Recess was always going to be a tough bridge for the Euro to cross unscathed.

Having spiked so far and so fast and having been supported by what seemed like at least one piece of positive ECB speak each week, the moment there stopped being upbeat commentary to interpret and dovish language to disregard the EUR was going to run into headwinds.

While this has certainly been the case against the Dollar, the Euro has been able to rise to new heights against a Pound which has been weaker even than the flagging common currency.

FX strategists at HSBC are starting to see divergence between positive news and the price action, as the Euro starts to look overbought to them, they think the time has come to take some profit,

“Tactically, the EUR is looking vulnerable. The rally this year has been impressive but August has seen some of the upward momentum fade. Positive news is generating less of an impact and the latest batch of ECB minutes show a growing disquiet with EUR strength. Such sentiments could be repeated by ECB President Draghi in upcoming speeches, including at the high profile Jackson Hole symposium. As a result, we are exiting our long EUR-GBP at 0.9110 for a total return of 2.50”

Draghi may disappoint at Jackson Hole

With President Draghi’s imminent return at the Jackson Hole symposium now just days away at the end of this week, there may finally be a reason for Euro traders to get back behind their desks in earnest.

The only problem is that there are rumours Mr. Draghi won’t comment on monetary policy.

This would be a major let down as the news wires have been building up the “blockbuster” element of the meeting for some time as the world’s two most important Central Bankers (Janet Yellen of the Federal Reserve is the other one) are set to speak.

This wouldn’t be the first time that Draghi has gone out of his way to say nothing at a critical juncture, and if he believes it prudent the reports will almost certainly be correct.

With an intense Brexit calendar upcoming, the slow grind upward could be replaced by sharper more volatile moves in EUR/GBP.

Good news for FX traders and bad news for Central Bankers.

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TAGS: Currency Predictions Euro Pound Forecasts