Pound/dollar remains under pressure and it is now trading under the round number of 1.35. At current levels, this is a drop of around 50 pips on the day. The low so far is 1.3489.
The latest trigger came from the mediocre data released in Britain, but worries about Brexit push Sterling down. In addition, rising bond yields in the US keep the greenback bid.
Here are the data points:
- UK Goods trade balance showed a widening deficit of 12.2 billion against 10.9 expected.
- Manufacturing output beat with 0.4% against 0.3% expected but this is the only positive data point. The wider industrial production figure met expectations with 0.4%.
- Construction output increased by 0.4%, but that is short of +0.7% that was expected.
All in all, British data is far from being inspiring. Later on, at 13:00 GMT, we will get the NIESR GDP estimate.
Regarding Brexit, we had an attempt by Chancellor of the Exchequer Phillip Hammond and Brexit minister David Davis to calm tensions with Germany. The ministers wrote an op-ed in a leading German paper, trying to strive for a better trade deal. However, the EU continues playing tough.
The top story in the financial press is that the 10-year US treasury yield reached the highest level in 9 months. For some, this indicates the end of the multi-decade bull market in bonds. In any case, it makes the dollar more attractive.
Support awaits at 1.3460 which capped the pair before it made a break and went all the way to resistance at 1.3615 in late 2017. Further support is at 1.3320.
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