Morning Report 19.12.2014
Raphael Sonabend, FX Analyst
Yesterday saw a quiet day across the board with the main highlights being the UK’s retail sales data in the morning and the US unemployment claims figures in the afternoon. With Christmas fast approaching it came as no surprise that retail sales rose to 1.6% from 1.0%, despite the forecast fall to 0.3%. US unemployment claims followed this trend and improved when the predictions foresaw a worse result. The final data-of-influence in the day was the Philly Fed manufacturing index, which saw a significant fall from 40.8 to 24.5. At 09:30 this morning, the Public Sector Net Borrowing figures out of the UK are due to be released. These will be shortly followed by further UK data in the form of CBI realised sales. With both sets of data forecast to improve, the pound could continue to strengthen against most counterparts. This afternoon’s focus will turn to Canadian data. At 13:30 CPI and retail sales figures are both forecast to fall compared to the previous month and we therefore anticipate the Loonie’s recent gains will be lost and the Canadian dollar could weaken further.GBP/EUR: Currently trading at 1.2758
On the back of strong UK retail sales figures, the pound gained on the Euro throughout yesterday’s session. Climbing from 1.2622 to 1.2760, this pair began to level off in the evening and traded around the 1.275 mark. This morning saw the GfK German consumer climate data beating forecasts and hitting 9.0, lending the Euro some strength to resist the pound’s gains. After months of pessimism regarding the German economy, this downward trend has reached an end after consistently strong reports have been released recently. As confidence is being restored in the German economic climate, these rays of optimism are likely to emanate into the Eurozone and the Euro could be looking at a much-needed rally at some point in the early New Year.
A relatively light calendar today will focus on the public sector net borrowing figures and CBI realised sales from the UK. Both sets of data are forecast to improve and we may therefore see further strengthening in the pound against the Euro.
GBP/USD: Currently trading at 1.5675
Cable witnessed slight volatility as strong UK and US data competed for the upper hand, UK data came out on top as the Philly Fed manufacturing index registered a pronounced fall. Yesterday morning saw the pound climb a cent on the dollar after retail sales saw a strong increase from 1.0% to 1.6%. The dollar quickly displayed its own might as US unemployment claims registered a result of 289K. As the Philly Fed manufacturing index saw a fall from 40.8 to 24.5, the pound recovered all previously lost ground and Cable is now trading around 1.5665.
No data out of the US today will leave this pairing dependent on UK releases. As UK data is predicted to improve, the pound could see another day of gains against the dollar.
EUR/USD: Currently trading at 1.2283
Yesterday afternoon saw the first hiatus in this pairing’s volatility as the Euro resisted the dollar’s gains that were made on the back of strong unemployment claims data. Confidence in the German economy clearly provided strength in the Euro throughout the day as the dollar’s hike was halted.
With no data out of either country today, level trading is likely to continue throughout, with the possibility of the Euro posting gains of its own.
GBP/AUD: Currently trading at 1.9222
The RBA bulletin, which was released early yesterday morning, failed to impress the markets and the then prevailing trends continued. Despite the US seeing strong unemployment claims figures, this pair rose from 1.9045 to 1.9222 before correcting back in the Aussie’s favour. This morning has seen Sterling once again resisting the currently weak Aussie and this pair has breached the 1.92 mark.
A quiet day today could allow the pound to continue its gains as UK data is predicted to improve. If the figures out of the UK exceed expectations, we could be looking at another attempt at the 1.93 mark.
GBP/NZD: Currently trading at 2.0163
As has been the trend over the past few weeks, this pairing saw heavy volatility throughout yesterday’s session. Reacting strongly to UK retail sales figures, this pair rose a cent throughout the day before beginning a fall in the evening in the Kiwi’s favour. Despite poor NZ data early this morning – the ANZ business confidence survey fell from 31.5 to 30.4 and annual credit card spending fell from 6.8% to 5.2% – the Kiwi continued its gains against Sterling. However these gains failed to continue and either as a delayed reaction to poor NZ figures or because of a natural correction, the pound resisted and began its own advances.
With UK releases today predicted to be strong, the pound could continue to gain throughout the day and possibly reach the 2.025 level that was seen yesterday.
GBP/CAD: Currently trading at 1.8180
Stable trading was seen throughout yesterday’s session with some brief excitement as the pound attempted to break the deadlock and made a dash for the 1.82 mark, breaching it momentarily before the Loonie dragged Sterling back to the 1.813 level.
Today should bring slightly more activity as Canadian CPI and retail sales figures are due to be released this afternoon. With both sets of data forecast to fall and UK figures forecast to increase, we could see the pound end the GBP/CAD standoff and rise up against the Loonie.
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