Market Briefing on Tuesday June 28th

Having touched an intraday high of 1.1111 during mid-European trade, EUR/USD fell back below the 1.1100 handle to trade within the 1.1065-1.1085 area at the start of the US trading session.

The final report on US GDP, released minutes ago, showed that the nations economy expanded at an annualized rate of 1.1% during the first quarter of 2016, outpacing the market consensus of a 1.0% growth. The second estimate pointed to a 0.8% growth. Core Personal Consumption Expenditures, however, rose at a rate of 2.0% in Q1, falling short of expectations, which did not expect any revision. The second estimate of Core PCE showed a 2.1% growth.

Meanwhile, in a statement at the global central bank summit in Sintra, Portugal, the ECB President Mario Draghi called for a better coordination of monetary policies between central banks in order to more effectively resolve the low-inflation issue. “In a globalized world, the global policy mix matters–and will likely matter more as our economies become more integrated,” Draghi said, cited by MarketWatch. “The speed with which monetary policy can achieve domestic goals inevitably becomes more dependent on others.”

There have been growing concerns that the ECB is exhausting its set of tools, with which to boost economic growth and inflation in the Euro bloc.

A two-day summit of EU leaders is to begin on Tuesday in Brussels, where the effects from Fridays vote in the UK will be discussed. British Prime Minister, David Cameron, is expected to participate at the first day only.

GBP/USD has so far retained bullish momentum on Tuesday, as it reached an intraday high of 1.3403. A break and consistent close above the 1.3400 mark may send the major pair up for a test of the 1.3465-1.3480 area, where it encountered resistance yesterday.

In the past two trading days the Sterling depreciated over 11% against the US Dollar, or the largest two-day slump in modern history, which saw GBP/USD plummeting to 1.3126, a level unseen since July 1985. At the same time, the UK banking shares lost almost 30% of their value in the past two sessions only.

Following Friday’s referendum, Fitch ratings agency said it had reduced the United Kingdom’s sovereign credit rating from AA+ to AA, while the outlook stays negative. This is the second agency to cut Britain’s rating, after a day ago S&P Global Ratings reduced the country’s creditworthiness to AA from AAA with a negative outlook as well. In addition, Moody’s Investors Services revised the outlook on the UK’s long term issuer and debt ratings to “negative” from “stable”, while the ratings were confirmed at Aa1.

“Markets may be heading towards consolidation after experiencing sharp losses within the post Brexit environment,” the head of currency strategy at Morgan Stanley, Hans Redeker, said, cited by Reuters. “However, with the downgrade (by S&P) the short-term negative news flow may have reached its peak.”

Having touched an intraday low of 1.2967 in early European trade, USD/CAD bounced back above the 1.3000 handle to trade within the 1.3030-1.3045 area at the start of the US trading session. Near-term resistance sits at 1.3100 (the high from June 24th/the daily 200-period Exponential Moving Average) and then – at 1.3145 (the high from June 2nd/upper Bollinger line on daily time frame). The pair has so far been supported in the area above the daily 55-period EMA in the past two trading days.

Gold futures for delivery in August came off highs unseen since March 2014 to hit an intraday low of $1,308.00 per troy ounce during Tuesdays mid-European trade. In early US session the precious metal was trading within the $1.312.00-$1,320.00 range. Near-term support may be received at the hourly 100-period EMA ($1,305.20) and then – at the hourly 200-period EMA ($1,293.80).