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Euro breaks $1.15 as Obamacare overhaul collapses

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Overnight US President Donald Trump suffered a defeat as Republicans abandoned their efforts to replace Obamacare. The move which could lead to no alternative being ready to replace Obamacare sent the Dollar lower across the board. The Euro gained to overnight highs of $1.1538, a level not seen since May last year. Donald Trump had tweeted, “Republicans should just REPEAL failing Obamacare now & work on a new Healthcare Plan that will start from a clean slate.”

UK inflation data marked for release at 09:30 could see the Pound continue to strengthen today. CPI, the Bank of England’s measure for inflation, is expected to show prices had risen 2.9% annually. Real wages in the UK keep falling and have failed to surpass pre-crisis levels. Should inflation break 3%, some argue the Central Bank will be forced to raise interest rates. Economists argue that inflation should start to ease, as the jump in import prices due to the fall in Sterling are just transitory.

Uncertainty around the Conservative government continues as Theresa May sends out a stark warning to her feuding cabinet that they should stop briefing against each other in the media as she tries to draw a line under a Brexit row. The comments follow recent leaks of conversations, aimed at damaging Chancellor Phillip Hammond which the Prime minister stated were “unhelpful” and had to stop.

Equity markets moved lower overnight in Asia and European equity markets are expected to follow suit. The FTSE is set to drop 15 points with the DAX down 14 points. The Dollar index dropped to fresh 10-month lows of 97.78 and was down 0.4%. The Euro gained to almost reach 2 year highs and jumped to $1.1538 while the Yen strengthened against the Dollar to its strongest level in two weeks, down to ¥111.99 from a high of ¥112.6. In commodities, Oil continued to make gains, adding 0.2% to $48.51, whilst Gold benefited from the move into safe haven assets, gaining 0.3% to $1,237.38.

EUR/USD $1.1513 (+$0.0035)

EUR/USD rallied to a fresh 14-month high overnight at €1.1537, boosted by a weaker US Dollar as the Senate healthcare bill seemingly collapsed after two more Republican Senators declared their opposition. US President Trump said soon after that Republicans should repeal Obamacare anyway and start from a clean slate. Euro impulses meanwhile have been limited with investors looking ahead to Thursday’s ECB meeting although German ZEW data due this morning could prompt some reaction. Above today’s high, we look for resistance at May 3rd high 2016 of $1.1614 followed by the August 24th, 2015 high at $1.1711. On the downside, yesterday’s low at $1.1433 and Friday’s low at $1.1390 are in focus.

GBP/USD $1.3095 (+$0.0041)

GBP/USD rose overnight, boosted by a weaker US Dollar as the Senate healthcare bill seemingly collapsed after two more Republican Senators declared their opposition. The pair reached a daily high of $1.3106, just short of Friday’s 2017 high of $1.3113. UK political uncertainty appears to have taken a backseat for now although Sky have a story this morning suggesting UK PM May will tell her party they risk allowing opposition leader Corbyn into power if they cannot unite behind her. Ahead, UK inflation figures at 09:30 BST could prompt some reaction in the pound ahead of possible comments from BoE Governor Carney this afternoon. From a technical view, Friday’s high at $1.3113 forms our first resistance level ahead of the September 22nd high of $1.3120 and September 16th, 2016 high of $1.3248. On the downside, yesterday’s low at $1.3044 may offer some support before Friday’s low at $1.2931.

USD/JPY ¥112.14 (-¥0.47)

USD/JPY fell to a fresh two-week low of ¥111.97 overnight, weighed by a weaker US Dollar as the Senate healthcare bill seemingly collapsed after two more Republican Senators declared their opposition. US President Trump said soon after that Republicans should repeal Obamacare anyway and start from a clean slate. The political uncertainty weighed on risk sentiment in Asia overnight with most bourses edging lower which boosted demand for the safe-haven Japanese Yen. From a technical view, the July 3rd low at ¥111.92 and June 30th low at €111.71 may offer support while on the upside we target yesterday’s high at ¥112.86 and Friday’s high at ¥113.57.

GBP/EUR €1.1365 (-€0.0004)

GBP/EUR is little changed ahead of the European open after paring an earlier decline. The pair fell sharply to a daily low of €1.1332 after news broke that the Senate healthcare bill had seemingly collapsed after two more Republican Senators declared their opposition. However, losses were steadily pared through the Asian trading session with investors now looking ahead to UK inflation and German ZEW data this morning. From a technical view, today’s low at €1.1332 forms our first resistance level before Thursday’s low at €1.1267. On the upside, Friday’s high at €1.1436 and the June 16th high at €1.1466 are in focus.

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