EUR/GBP: a consolidation phase while GBP runs out of steam

EUR/GBP is stuck in a range after last week's Jackson Hole and subsequent remarks from Fischer.

"Jackson Hole delivered a further rise in the market's confidence that the Fed will hike rates this year. All eyes will now be on ISMs and on Friday's payroll data. If these are strong, the market's confidence could go through the roof," explained Kit Juckes, economist at Societe Generale. "That doesn't mean that Fed will actually do anything of course (they and the market have cried wolf before, after all) but the scene is set for the summer calm to be interrupted by much Fed speculation along with an increased focus on the US Presidential Election."

While market's attention is on the Fed for the time being, it will not be long again before the Brexit risks come back into focus once the US elections are out of the way and that could lead to some bearishness around the pound again. However, the ECB is in play again next month as well, so there are busy times ahead for the cross.

"EUR/GBP formed an interim low at 0.8487, not far above the two month support line at 0.8452. While 0.8487 underpins we still expect to see some days of Euro strength," explained analysts at Commerzbank, adding, "Our first upside target is the August 18th low at 0.8592 and our next upside target the July peak at 0.8614. Longer term the market remains on course for the 0.8815 February 2013 peak." To the downside, "Only currently unexpected failure at .8487/52 would make us short term bearish again and target the current August low and 55 day moving average at .8367/45," explained the analysts.