The Pound has been putting on quite a show for the past week as anticipation of the Scottish Independence Referendum mounted. On Thursday the GBP made gains as  results came in as a “No” vote, meaning Scotland would thereafter stay in the UK.

The English currency reached highs against the Dollar on Thursday of 1.6405 before unexpectedly going back down to a close of 1.6392; still it made an overall 127 pip gain on the day. It is clear that market forces were keeping the Pound down on Friday as it reached highs of 1.6524, but couldn’t keep it up, closing at 1.6283 – lower than its starting point on Thursday. The currency pair experienced a 240 pip drop as it closed Friday. This is most probably due to profiteering as investors drew their funds when the Pound reached it apparent height.

Today paints a different picture for the GBPUSD as the pound strengthened against a weakening US Dollar prior to Mark Carney’s speech which is due to take place this week. The currency pair opened Monday at 1.6296 and has since made gains of 56 pips, currently trading at 1.6352.

The Pound has so far opened its week on a positive note, triumphing against most of its major counterparts, as futures signaled increasing prospects that the Bank of England will increase borrowing costs come 2015.

Technical Indicators Signal Dollar’s Gains were Superficial

For the first time in four trading sessions, the Dollar dropped against the Yen, as technical indicators suggested that the Dollar’s recent surge in gains may have been too much, too fast. The 14 day relative index for the Dollar-Yen was at 81.

Despite this recent downturn, the Dollar is not expected to keep falling, as Daisuke Karakama, chief market economist at Mizuho Bank based in Tokyo pointed out that “we are seeing a pause or lull in the stronger dollar trend, rather than an end to it.”

Since its four session streak the Dollar increased by 1980 pips overall, and is currently trading at 108.89 after opening the week at 108.99.

The Euro Makes Gains Ahead of Draghi’s Testimony

The Euro stagnated against the Pound despite major events last week. The EURGBP is currently trading at 0.7870, relatively unchanged from its close on Friday at 0.7876. Against other majors the Euro has started to edge upwards before European Central Bank President Mario Draghi is due to speak today. Draghi is set to give testimony to the European Parliament’s Economic and Monetary Committee in Brussels.

The Euro even made gains against the flailing US Dollar, currently trading at 1.2856 after dropping 93 pips to a close Friday at 1.2828.

Today’s Focus

2:00pm GMT (+DLS): European Central Bank president is due to testify on monetary policy before the European Parliament’s Economic and Monetary Committee in Brussels. Expect volatility as investors will attempt to decipher interest rate clues.

6:00pm GMT (+DLS): Government council member in Canada Wilkins is due to deliver a speech at the Chartered Financial Analysts Society in Toronto. The speech is entitled
The New Economic Reality for Canada Emerging in the Wake of the Great Recession and what it Means for Monetary Policy. 
This sounds like a proposal for a blueprint of future economic plans and is planned for release 15 minutes before the speech itself.

By FXGLOBE : www.fxglobe.com