It’s a relatively straightforward risk positive day as markets carry over the mood from Friday. Here’s a snapshot of the equities space at the moment:

• Eurostoxx +1.4%
• Germany DAX +1.3%
• France CAC 40 +1.4%
• UK FTSE +1.4%
• S&P 500 futures +1.0%
• Nasdaq futures +1.2%
• Dow futures +0.9%

There isn’t much else for traders and investors to work with but the scraps and pieces from Friday last week. But as much as we are seeing risk optimism and the dollar losing some notable ground, best be wary that it might not take much for things to switch around.

There are still risk headwinds in the form of recession fears and Europe still has a potential gas crisis looming. Meanwhile, while market players are focused on the 75 bps vs 100 bps debate on the Fed, let’s not forget that the central bank is still poised to raise rates towards the region of 3.50% and 4.00% potentially. As soon as the above debate is over and done with, the point of the terminal rate is arguably still reason enough to keep the dollar in a good spot, all things considered.

This article was written by Justin Low at www.forexlive.com.

I wouldn’t chalk up much of this move to the pound, even if it is the best performing major currency today. It is all about the dollar at the moment as the softer greenback is paving the way for other major currencies to gain. As markets also carry over the mood from Friday, the more positive risk sentiment is also weighing on the dollar (and to some extent, giving the pound a lift as well; something something sterling behaving like a risk currency).

GBP/USD is now trading up to 1.1982 – its highest since 11 July – as buyers look towards retesting 1.2000 on the day:

I mentioned earlier that with there being little for markets to work with, this may be a more straightforward session where risk dominates. That appears to be the case now and while there is scope for the dollar to retrace as well, just be wary of key levels up ahead.

As highlighted earlier, the 1.0200 mark may be one to watch technically for EUR/USD and 1.2000 is also going to be a key psychological level for cable in that sense. I would argue that commodity currencies have more room to roam with AUD/USD potentially eyeing back a push towards 0.7000 and that might also give cable some scope for additional gains considering its recent behaviour.

To start off the new week, all the attention is on the dollar and risk sentiment and as long as trading sentiment continues to focus on that, we could see some of the early moves here extend a little more.

But as mentioned earlier, I’d still wager that this is merely a dollar retracement and that the bulls aren’t done yet considering that the Fed hasn’t wavered much in its resolve to hike rates towards the terminal region around 3.50% to 4.00%.

Once markets get past this whole 75 bps vs 100 bps debate, the focus on the above will most likely keep the dollar underpinned.

This article was written by Justin Low at www.forexlive.com.

• But neutral rate is lower than pre-global financial crisis times
• I don’t think we’re done on rate rises
• Don’t want to lean against idea that bank rate goes to 2%, but not endorsing it either

Ugh, neither here nor there by Saunders and I’ll just repeat my message from earlier:

„Just be aware that Saunders will be stepping down as BOE policymaker on 8 August. That said, his remarks does echo what the central bank has been preaching for a while now. However, it isn’t so much what the market perceives as punters are fearing that the BOE may have to stop in their tracks as the UK economy grinds towards a recession.“

This article was written by Justin Low at www.forexlive.com.

• Doesn’t regard bank rate of 2% or higher next year as being unlikely, implausible
• Cost of not tightening promptly enough is relatively high
• Rather than focus on precise forecast for bank rate next year, key point is that tightening cycle may still have some way to go

Just be aware that Saunders will be stepping down as BOE policymaker on 8 August. That said, his remarks does echo what the central bank has been preaching for a while now. However, it isn’t so much what the market perceives as punters are fearing that the BOE may have to stop in their tracks as the UK economy grinds towards a recession.

This article was written by Justin Low at www.forexlive.com.