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FX round-up: Pound, euro take out their 2017 highs

By Alexander Bueso

Date: Monday 15 Jan 2018

FX round-up: Pound, euro take out their 2017 highs

(ShareCast News) - Sterling shot higher at the end of the week, with traders referencing a report that the Spanish and Dutch finance ministers were hoping to promote a soft Brexit as the main trigger behind the move.
So having started the day at 1.3528 against the US dollar and against a backdrop of steady gains in global stockmarkets, the pound pushed convincingly past its 2017 highs of 1.3660 to finish at 1.3728.

Commenting on Friday's price action, Michael Hewson, chief market analyst at CMC Markets UK, said the next resistance levels for the currency pair now lay at 1.3830 and 1.3975.

The European single currency also put in a strong showing, jumping from 1.2032 to 1.2202, a three-year high, leaving its own 2017 highs at 1.2095 in the rearview mirror.

In the same go, euro/dollar also rose past the 50% Fibonacci retracement of its drop from 1.3995 to 1.0340, at 1.2170, clearing a path for an advance towards the 1.2600 area.

Boosting the euro, early in the session a breakthrough was announced in talks between the German Chancellor Angela Merkel's CDU and the Socialist SPD as they tried to thrash out a grand coalition.

However, some analysts were cautious about overreacting, with those at Daiwa Capital Markets telling clients: "despite the inevitable warm tone from party leader Schultz as he presented the agreement, opposition within the SPD to any future cooperation with Merkel should not be underestimated.

"So, even under the assumption that SPD delegates vote next weekend to give a green light to formal negotiations, we might yet see more drama unfolding in German politics over coming weeks. And it appears unlikely that a new government will be in place before Easter."

Acting as a backdrop, the US dollar spot index slipped again, plumbing a fresh 52-week low at 90.773.

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