Sterling is underperforming most of its G10 peers this morning. Economists at TD Securities think cable will continue to keep pace with the USD in general, but they are keeping an eye on EUR/GBP which continues to look bid as it approaches key trendline resistance.
Some potential for a near-term squeeze higher on EUR/GBP?
“We have Bailey's Mansion House speech coming up this week which could be keeping some on the sidelines as well as the usual suspects of month/quarter-end and payrolls on Friday.”
“We think cable will continue to keep pace with the USD in general, but we are keeping an eye on EUR/GBP. Interestingly, the cross continues to look bid as it approaches key trendline resistance that comes in at around 0.8610 today. At the same time, the daily MACD has also started to look a bit more constructive for upside potential.”
“Looking forward, we think a close above 0.8610 could see some extension toward 0.8645, but we would be inclined to fade that move — at least initially. With the ECB reminding us of its dovish leanings, we think the bullish case for the EUR is not particularly strong right now.”