The GBP recovery has been short lived and small so far this week. The FX market is desperately seeking reasons to buy the Pound that would give UK importers at least some temporary respite. We could need a little more than Angela Merkel playing the diplomat, to shift momentum higher.
Elsewhere, the resignation of the Italian premier is doing little for the EUR, and the potential for a German recession is keeping the single currency paired back for the time being.
In the US, Federal reserve minutes and intimation of the size of the next interest rate move, is the real focus for the USD. With the DXY (USD trade weighted index) still remaining upbeat. As a consequence, GBPUSD hovers above 1.2100, almost magnetic line. Exporters could look to target a break below this level for upcoming hedging programmes, or short-term spot transactions.
There is still a summer holiday feel to FX markets, with liquidity generally down and direction anodyne. For now. Risk, however, still dominates.
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