EUR rally resumes
The world’s most popular currency pair is currently being driven by the “Sell America” theme. ECB officials continue to back a June rate cut, but this is being trumped by the bleak US fiscal outlook, tax cut bill wrangling and the Treasury markets. Focus turns to today’s survey data including the IFO German business figures and the PMIs. But the bigger theme is that investors are moving away from USD and into liquid alternative currencies which is benefitting the euro. On the charts, the RSI has ticked higher after chopping either side of 50, indicating a pickup in bullish momentum. Near-term support is seen at the 50-day SMA at 1.1140 and around 1.1243. That is a minor Fib retracement level of this year’s rally. The upward trendline from the late February low has been broken so regaining that would take prices near to the recent top at 1.1572.
Cable pushing to new highs
Yesterday saw GBP pop up to a new three-year high at 1.3468 on the release of the hot CPI data. All measures beat expectations with stagflation vibes strong, but services inflation was heavily influenced by one-off factors which the BoE is likely to look through. That said, rate cuts bets were pared with around 5bps of easing by December taken out, with the next reduction seen in late summer at the earliest. The MPC is seen on hold in June, with quaterly rate cuts still the preferred modus operandi and possible if inflation eases back. The previous top in GBP/USD was 1.3434 with the psychological 1.35 above.
Bitcoin posts fresh record highs
Since Liberation Day in early April, bitcoin has lurched from the verge of erasing all of its post-election gains to new highs. The world’s most traded cryptocurrency posted a further all-time top earlier today at $111,903. This is remarkably a roughly 50% surge from one year ago. Strong inflows have reversed a souring appetite for digital assets after tariff threats had fuelled a flight to safe havens. Institutional demand continues to build with $6.9bn flowing into the US-listed ETF in recent weeks. Less negative market sentiment with new legislation in progress is also helping BTC, while open interest in Bitcoin futures has reached record levels. This points to strong expectations for more price advances, attracting both retail and institutional traders.