FX market overview before ECB decision

The underperformance of the GBP is understandable in the current FX market, which has shifted towards favoring growth. Currencies from economies with weak or stagnant growth are being penalized.

FX market overview before ECB decision

In this context, it wasn’t surprising to see the EUR decline further yesterday, falling below the 1.09 mark and trading beneath the 200-day moving average for the first time since early August. This breakdown is likely to encourage EUR bears, with significant support not appearing until the 1.08 level, which could be tested soon. I remain bearish on the EUR, preferring to sell on any rallies.

Euro struggling

The euro's struggles coincided with broad dollar strength against G10 currencies, even as Treasuries rallied slightly across the curve. The DXY climbed above 103.50, a level not seen in over two months. The pound was hit hardest by the dollar's strength, though the Australian dollar also showed notable weakness, as the RBA increasingly stands out as an outlier among G10 central banks.