Tuesday, 20 January 2015

The QE Countdown Begins...

Raphael Sonabend, FX Analyst


Another quiet day yesterday saw range-bound trading throughout the day. The pound saw weakness in the early afternoon but has recovered all lost ground this morning. Traders received some encouragement this morning in the form of strong Chinese data, which has shown steady growth across the industrial sector. Worries of a Chinese slowdown were temporarily subdued as commodity currencies saw strength as a result. Today we will look towards German ZEW economic sentiment at 10:00 then to Canadian manufacturing sales at 13:30. With the ECB meeting only two days away and tension continually increasing between the ECB and Bundesbank, it may be possible that the German sentiment figure registers as more pessimistic than forecast.



GBP/EUR: Currently trading at 1.3057
The euro gained against the pound throughout yesterday’s session, briefly pushing the pair below the 1.301 support level this morning before Sterling managed to resist. This morning’s monthly German PPI figures saw a fall of 0.7% and helped support Sterling’s gains.
Eurozone data steals the spotlight today; with German ZEW economic sentiment this morning forecast to rise from 34.9 to 40.1, the euro could attempt another advance toward 1.30.


GBP/USD: Currently trading at 1.5125
The pound struggled to gain on the dollar throughout yesterday and in the afternoon Sterling’s defences weakened and the greenback gained a cent. The pound has begun to recover these losses in this morning’s session and with no data due from either country before this afternoon, the pound’s gains could continue.
Today’s focus will be on the US this afternoon. Fed member Jerome Powell will be speaking on “reforming the USD LIBOR” at the same time as the NAHB housing market index is due to be released. Hawkish tones from Powell could lead to dollar strength, which has the potential to be supported by the housing data, forecast to improve from 57.0 to 58.0.


EUR/USD: Currently trading at 1.1579
The great stour between euro and dollar continued yesterday as this pair battled to 1.1639 before the dollar’s defences redoubled and pushed the rate back toward 1.1575. Greenback gains saw slight support this morning as German PPI fell 0.7% and the Italian trade balance fell to 3.54B from 5.40B.
This morning will focus on German ZEW economic sentiment, forecast to rise by 5.2, before shifting across the pond this afternoon to the NAHB housing market index, forecast to rise by 1.0. Recent trends are likely to continue today as both currencies attempt to gain ground.


GBP/AUD: Currently trading at 1.8427
Fairly range-bound trading yesterday saw this pair close barely above opening levels. This morning’s Chinese data saw short-term Aussie strength, which failed to hold. Chinese quarterly GDP registered at 7.3%, above the forecast 7.2% and industrial production rose 7.9% compared to the previous year’s 7.2%. Whilst Chinese data hasn’t been particularly strong recently, some sectors have seen signs of steady growth and this is already a step in the right direction.
No data due out of either country until tonight’s Australian Westpac consumer sentiment survey. Whilst no forecasts are available for this survey, range-bound trading can be expected to continue at least until tonight.


GBP/NZD: Currently trading at 1.9544
Yesterday saw this pair trade with fairly range-bound movement between 1.95 and 1.94 (a tight range for this pair). The pound picked up strength in the evening despite NZ NZIER business confidence survey rising from 19 to 23 and business conditions improving across the board.
With no data due out of either country this morning, the pound could continue to advance. However this afternoon and evening will focus on NZ data. The GDT price index is due out at any point today, with no forecast or time set, volatility may be seen in anticipation. This evening’s NZ CPI is forecast to drop to 0.0% compared to the previous quarter’s 0.3%. The Kiwi may therefore continue to fall against the pound.


GBP/CAD: Currently trading at 1.8088
The pound was unable to take advantage in yesterday’s session and ended up weakening, even after news that the demand for foreign securities declined in Canada last month.
The focus for today will be on Canada’s Manufacturing Sales data early this afternoon, where a lack of progress could give the pound room to advance.









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