EUR/USD near multi-year lows before US jobs data

Summary:

• EURUSD drops to lowest level since June 2017
• Pound steady as Brexit deadline draws ever closer
• Debenhams shares jump as Ashley attempts coup

A dovish move from the ECB yesterday has weighed on the single currency and sent the EUR/USD below the $1.12 handle to trade at its lowest level since June 2017. The world’s most widely traded currency pair now appears vulnerable to further declines and should we get a solid employment report from the US this lunchtime then more downside could well lie ahead. The greenback has enjoyed a solid week of gains despite President Trump once more calling for a weaker currency last weekend and the market is expecting another good jobs figure this afternoon which could provide an additional boost to the buck.

Divergent monetary policies suggest scope for further declines

While the latest economic data from the Eurozone continues to point to a marked slowdown the US is holding up relatively well and even after the Fed’s U-turn on further rate hikes at the beginning of the year, there’s a clear divergence in monetary policy on both sides of the Atlantic. The ECB announcement yesterday represents the first time a major central bank has announced further stimulus measures in recent years and is a clear sign of falling confidence in the bloc’s fragile economy. With the market already pricing in no further US rate hikes this year, there is some suggestion that traders are underestimating the future path of monetary policy and further strong data from the US could put pressure on the Fed to consider hiking once more - something which would provide additional support to the greenback.   

Pound steady as Brexit deadline draws ever closer

It’s been a mixed week for the pound on the whole as traders await further clarity on Brexit developments, with sterling losing ground to the US dollar but rising against the Euro - largely due to movements in the other half of the currency pair. All the signs point to another heavy defeat for PM May in the Commons next week when the “meaningful vote” occurs but this hasn’t got the markets too worried, with the consensus still working on the assumption that the defeat with pave the way for an extension of Article 50. While this does look the most likely outcome it is far from a foregone conclusion and requires approval from the other 27 EU states. Any suggestion that this may not occur could well lead to another swoon in sterling and catch the majority off guard.           

Debenhams shares jump as Ashley attempts coup

There’s been a spike higher in Debenhams after news broke that Mike Ashley plans to take the helm at the embattled retailer. According to reports, Ashley plans to step down as CEO of Sports Direct and be handed an executive role at Debenhams in a bid to turn around the plight of a company whose share price has fallen by almost 90% in the past year. A double-digit percentage jump in Debenhams shares shows that there is clearly some appetite amongst investors for such a move, but with them trading at just 3.5p a pop even after the rise it is clear the firm is still teetering on the brink.  

Debenhams shares may have jumped today but the market remains in a clear longer term downtrend. Source: xStation