US AM Digest: Turkish Lira Boosted By Surprise 125bps Rate Hike, EUR Buying Resumes Ahead of ECB

US Market Snapshot via IG: DJIA 0.2%, Nasdaq 100 -0.1%, S&P 500 0.05%

Major Headlines

  • Turkish Central Bank Delivers 125bps Rate Rise
  • UK Publish Expected End Date for Irish Backstop proposal

TRY: The Turkish Central Bank regained some of their credibility this morning after delivering a surprise 125bps rate hike, which bolstered the Turkish Lira as central bank look to stabilise the currency and fight against rising inflation. Subsequently, USDTRY crashed through 4.50, reaching a low of 4.45. The rate hike should keep the Turkish Lira stable, heading towards the June 24th snap election, however with President Erdogan a vocal critic over high interest rates, concerns will rise over his intentions on monetary policy after the election.

EUR: Buying for the Euro persists as we head towards the ECB monetary policy decision as investors digest continue to digest the recent comments made by ECB members in which they highlighted that QE exit will be on next week’s agenda. EURUSD losses following a sharp decline in German Industrial Orders were brief, with greater attention placed on the ECB meeting, the pair currently hovering around best levels having broken above 1.18 and now intent on making a run for 1.19.

GBP:A choppy session for the Pound this morning amid a flurry of Brexit related headlines. Rumours had surfaced that Brexit Minister David Davis could resign over an open-ended Irish backstop proposal. This later prompted PM May to provide a temporary commitment to have a backstop that will come to an end by 2021, as such, Brexit concerns continue to keep GBP subdued.

DailyFX Economic Calendar: Thursday, June 7, 2018 – North American Releases

DailyWebinar Calendar: Thursday, June 7, 2018

IG Client Sentiment Index: GBPUSD Chart of the Day

GBPUSD: Data shows 70.2% of traders are net-long with the ratio of traders long to short at 2.35 to 1. In fact, traders have remained net-long since Apr 20 when GBPUSD traded near 1.42373; price has moved 5.7% lower since then. The number of traders net-long is 2.7% lower than yesterday and 0.9% higher from last week, while the number of traders net-short is 3.8% higher than yesterday and 5.6% lower from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests GBPUSD prices may continue to fall. Positioning is less net-long than yesterday but more net-long from last week. The combination of current sentiment and recent changes gives us a further mixed GBPUSD trading bias.

Five Things Traders are Reading

  1. US Dollar Losing Streak Hits Fourt Days with G7 in Focusby Christopher Vecchio, CFA, Sr. Currency Strategist
  2. S&P 500 and Dow Charts Continue to Make Good on Bullish Sequencesby Paul Robinson, Market Analyst
  3. Ripple (XRP) Price Battles with Technical Resistance; Where Next? by Nick Cawley, Market Analyst
  4. Preview: Can the Turkish Central Bank Deliver Delightful Boost to Turkish Lira on Surprise Rate Hike?” by Justin McQueen, Market Analyst
  5. Euro at Risk of Profit-Taking as End of Asset-Purchase Program Nears” by Martin Essex, MSTA , Analyst and Editor

— Written by Justin McQueen, Market Analyst

To contact Justin, email him at Justin.mcqueen@ig.com

Follow Justin on Twitter @JMcQueenFX

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