Markets expect a looser ECB and tighter Fed on monetary policy

Currencies Direct July 25th 2016 - 2 minute read

The Greenback continued its strength as the safe haven currency while investors continue to be nervous about global growth concerns. With softer than expected Services PMI readings from the UK showing a contracting services sector, the pound lost considerable ground on Friday against the major currencies, although slightly positive manufacturing data has helped Sterling erase some of its losses.
 
In the aftermath of the Brexit vote, uncertainty still continues to run rife in the markets, though the newly formed Cabinet are taking steps to ensure that stability can be restored as soon as possible. With Article 50 not due to be triggered in 2016, markets are pricing in action from the Bank of England, either in the form of an interest rate cut or a possibility of further quantitative easing to provide more liquidity to the markets.
 
On the economic calendar from the UK, a quiet start to the week sees the CBI Industrial Trends Orders out later today to provide interim direction for the pound.
 
Focus on Italian banks and German economic data
 
Meanwhile, despite positive data from the manufacturing sector in the Eurozone, the focus will move to the Italian banks as they undergo further stress tests later this week to determine the extent of measures the European Central Bank will need to take. As for today, economic data is out from Germany with business sentiment and conditions making up the lone set of economic data.
 
Most of the direction for EURUSD is set to come from the general investor consensus as they expect a looser policy from the ECB on quantitative easing for the Eurozone and a tighter Federal Reserve in the US given the positive data prints pointing to a more stable environment. The Dallas Manufacturing Business Index is the only data print released today from the US.

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