Global equity markets fell yesterday due to heightened tensions in the Middle East after US President Trump threatened Russia with US military action in Syria. Risk assets underperformed and crude oil spiked to the highest level since 2014 on fears of supply disruptions.
GBPUSD closed yesterday’s session broadly unchanged despite a smaller-than-expected trade deficit, weaker-than-expected industrial production and underwhelming manufacturing and construction data.
Our traders currently see GBPUSD short-term technical resistance levels at 1.4220-50, and short-term support at 1.4160 ahead of 1.3965. In EURGBP, resistance lies at 0.8750 ahead of 0.8800, while support comes in at 0.8665.
The Fed minutes struck a slightly hawkish tone but it was not sufficient to drive the USD higher. The minutes were broadly consistent with Barclays Research’s view “… that the committee could shift to a four-hike outlook this year in June if the economy evolves as expected…”
The sharp sell-off in RUB since the start of the week (c. 7% vs the USD) retraced a bit during yesterday’s session and attention is now on the likely central bank response. Barclays Research does not think that “…the central bank will intervene in the FX market at this stage…” but “…the CBR will have to halt the easing cycle…” due to the strong FX pass-through to inflation.
Today the ECB’s minutes from the March meeting are released where Barclays Research expects “… more precise guidance on the interest policy path starting in April…” Barclays Research warns that “…there is a risk that they reveal a hawkish view, with the decision to drop the pledge to step up APP matched by a desire for faster deposit rate hikes…”