It seemed that the pound had reached the 1.5220 support against the dollar. However, due to a sharp rise on the euro/pound, the pound was forced to head back from 1.5284. Demand for the euro rose after the publication of positive German IFO August data and the euro is retaining its strength up to now.
The German IFO business climate index rose from 108.3 to 108.5. The index stood at 114 according to current estimates, against a previous 114.8 and a forecasted 114.7. The index for business expectations was 103.3 against a previous 102.2 and forecasted 101.4. France’s business optimism index was assigned a value of 104 (previous: 103).
The economic calendar is empty for the pound: it has nowhere from which to gather strength. The market is selling pounds left right and center since participants don’t expect the Bank of England to put up its base rate until 2016.
The euro/dollar and pound/dollar, as on Wednesday, are yo-yoing. It’s difficult to say what’s going where. Either the pound/dollar will return to 1.5275, either the euro/dollar will fall to 1.12.
For me the situation is still unclear. When there’s such uncertainty amongst market participants, it’s better to exit the market. There’s not much sense in trying to offer up some kind of scenarios for the key pairs this evening.
Market participants’ attention has switched over to the US stats that are due. We will get to see the numbers for durable goods orders, unemployment benefit applications and new housing sales for the country. At midnight the Fed’s chief, Janet Yellen, will give a speech.