GBP/USD Breakouts Out, GBP/CHF Next – EUR/USD Jumpy Pre-ECB, NFPs

Talking Points:

- GBP-crosses starting to breakout - EURGBP, GBPCHF next?

- EURUSD nears 1.3700 before ECBs, US NFPs on Thursday.

- See the DailyFX Economic Calendar for Thursday, June 26, 2014.

No summer slowdown is in sight for the UK economy, and the British Pound is streaking to fresh 2014 highs versus the US Dollar as a result. The June UK PMI Manufacturing report was the latest clip of ammunition the Sterling needed to take its next leg higher. The question is, were you properly positioned for the GBPUSD rally?

If not, fear not: opportunities may be afoot elsewhere. Mainly, our focus is centered on GBPCHF and EURGBP (interchangeably) as the recent consolidations in the post-June ECB meeting world are now coinciding with the time aspect of the trends in place since March. In other words, the time has come for GBPCHF to rally and EURGBP to fall; the conditions are near-ideal from the technical perspective.

Turning an eye back to EURUSD, this week should be plenty exciting with both the July ECB meeting and the June US Nonfarm Payrolls report both due out between 11:45 GMT and 12:30 GMT on Thursday. Considering that there hasn’t been nearly enough time for the rate cuts to make their way through the Euro-Zone economy and have an observable impact, the ECB will do little if anything along this front.

Further to this point, recent June German core inflation numbers have exceeded expectations at +1.0% y/y from +0.6% y/y, underscoring the Governing Council-wide sentiment that prolonged low inflation, not necessarily deflation, is a risk. Liquidity risks have evaporated as EONIA rates have fallen towards the lower end of the interest rate corridor (where the deposit facility rate sits at -0.10%).

See the video above to see how these fundamental developments translate into trading ideas for EURUSD, GBPUSD, GBPCHF, and EURGBP.

Read more: Don't Rule out $1.3700 if ECB Sits Tight

--- Written by Christopher Vecchio, Currency Analyst

To contact Christopher Vecchio, e-mail [email protected]

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