| Myles Baxter, FX Analyst Mixed data from the US left it as the ultimate winner in yesterday’s trading session. Poor US CPI and Core CPI figures left the dollar in a weaker state in the afternoon however its global peers failed to capitalise ahead of the Fed Statement and Press Conference that loomed in the evening. The Statement and Economic Projections by and large confirmed recent information and led the market to viewing it with a dovish tint. It was the press conference in the evening that really kicked things off! Yellen’s conference was full of economic optimism and progression towards the 2% inflation target was bolstered. The key phrase used was “normalisation is unlikely to come during the next couple of meetings”, fuelling speculation that an interest rate hike may fall in mid-2015. This morning’s encouraging UK Retail Sales may help the pound resist the dollar but with unemployment claims and the Philly Fed Manufacturing Index due this afternoon, this could be a big ask.
GBP/EUR: Currently trading at 1.2691
A stellar Sterling performance was seen yesterday after strong UK data emerged in the form of average earnings index and claimant count change. The pound gained against the Euro throughout the day on the back of these sturdy figures. The German Ifo business climate survey, which was released this morning saw the pound continue to gain on the Euro, despite a promising result of 105.5.
After a busy couple of days, today will see relative quiet from both countries with the main focus being the UK retail sales data out this morning. UK retail sales showed an impressive figure of 1.6% far higher than the predicted 0.8%. This will undoubtedly help the pound in its current campaign to win back the upper echelons of the 1.20 region and we expect advances towards 1.2750 shortly.
GBP/USD: Currently trading at 1.5622
The dollar slowly climbed against the pound throughout yesterday’s session before jumping a cent after the FOMC economic projections were released. Strong figures across the board as all projections saw a revised increase. Their released graphs suggest that the majority of Fed members deem a rate rise in 2015 to be the most appropriate time for the first hike with only two members proposing otherwise.
The dollar’s gains met resistance at the 1.5535 mark only an hour after the Fed projections were released and has since been losing ground against the pound. With decent UK data and US data forecast to decline, the pound could continue to regain its losses made against the greenback yesterday.
EUR/USD: Currently trading at 1.2305
Volatility was witnessed after the Fed statement was released yesterday evening. Initially, the dollar weakened against the Euro and fell half a cent, before the release of the press conference which allowed a reversal and the dollar recovered significantly. The greenback continued to gain in this morning’s session, jumping half a cent before meeting opposition at the first resistance level and starting a correction in the Euro’s favour. The euro kept this momentum flowing as the German Ifo business climate survey resulted in 105.5, above the previous result of 104.7.
The US Philly Fed manufacturing index survey this afternoon is forecast to drop off from 40.8 to 26.3. After a poor flash manufacturing PMI figure was seen on Tuesday, this fall would not come as a surprise and in fact is unlikely to affect the dollar significantly as the results have likely already been priced in.
GBP/AUD: Currently trading at 1.9105
The Aussie breached the 1.93 mark yesterday hitting five-year lows against the pound. The pound was unable to sustain this level against the Aussie and this pair has since been trading in favour of the Australian dollar. The Fed conference saw a spike in this pair but failed to influence the rate in the long-run.
Today will see no data out of Australia and therefore the focus will be on the UK and US. With solid UK retail sales, another challenge at 1.92 may be on the cards in the next week or so.
GBP/NZD: Currently trading at 2.0202
Volatile trading was seen throughout yesterday’s session as the Kiwi fell two cents against the pound in the early hours before recovering over the course of the day and eventually closing at the same level as opening. A strong GDP figure out of New Zealand saw the quarterly growth increasing by 1.0%, above the forecast 0.7%. This positive figure allowed the Kiwi’s gains to extend into this morning’s session.
NZ data is relatively light today with the only expected release to be visitor arrivals at 21:45 however we anticipate that this data will not be received with much market excitement. This lack of data from New Zealand could support the pound when coupled with this morning’s UK retail sales.
GBP/CAD: Currently trading at 1.8141
After nine days of desperately trying to resist the pound’s gains, the Loonie finally blocked Sterling’s lunges and riposted with thrusts of its own until breaking the deadlock and gaining almost three cent. US crude oil inventories data yesterday showed a decline in barrels (however not as much as forecast), which led to oil prices rising slightly. The Canadian economy, which relies heavily on oil, reacted to this refreshing spike in oil prices and the Loonie gained accordingly.
Whilst the Loonie has finally started to resist sterling’s gains, with oil prices at record lows it is unlikely that this pairing will see a true reversal soon.
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Thursday, 18 December 2014
CPI figures leave dollar in a weak state
www.caxtonfx.com Morning Report 18.12.2014
