ECB hawkishness is being rowed back. Get your market update from nickcawley1 here:
While the US inflation release at 13:30 GMT is today’s focal point for traders, Friday’s UK GDP release will be closely watched for clues as to how the UK economy performed as the country was hit by the Omicron wave. Sterling is currently supported by a hawkish Bank of England stance with the central bank expected to raise interest rates this year by over 100 basis points from the current rate of 0.50%.
The IG retail sentiment data below shows a very sharp change in weekly EUR/GBP positioning, most likely driven by last Thursday week’s ECB meeting. The number of EUR/GBP net-longs hs been reduced by 36.5%, while the number of net-shorts shows a sizeable increase of 88%. EUR/GBP currently trades either side of 0.8430 with little in the way of direction. Monday’s high at 0.8479 is not expected to come under pressure pre-GDP release, while this week’s double bottom at 0.8413 will provide the first line of support. Below here there is a cluster of old low prints all the way back down to 0.8383 which should hold any short-term sell off.
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