Raphael Sonabend, FX Analyst
A few days out of the spotlight proved beneficial for the pound as it rose almost two cent against the majority of its counterparts yesterday. As UK figures were put on the backburner in the midst of speculation surrounding the ECB meeting tomorrow, the UK is firmly back on centre stage as employment figures are due out today. At 9:30, average earnings index, claimant count change and the MPC official bank rate vote are due to be released. Traders will likely set their focus on the average earnings index, which holds more importance after recent low inflation figures. The official bank rate vote is likely to remain at two votes to increase rates and nine votes to hold rates. Ahead of the ECB meeting tomorrow, analysts have been predicting the amount of money the ECB will print as part of their stimulus plan. As new forecasts emerge, volatility spikes in euro pairings and we anticipate this trend will continue throughout today’s session.
GBP/EUR: Currently trading at 1.3095
The pound continued to climb yesterday, gaining almost two cent on the euro throughout the day. Eurozone data, which saw strong figures, failed to limit the pound’s advances. German ZEW economic sentiment rose to 48.4 from 34.9 and Eurozone ZEW economic sentiment rose to 45.2 from 31.8. The German result was the highest reading for 11-months and was led by confidence in exports. A weak euro and strong domestic readings have allowed German exports to thrive.
The UK is back in the spotlight today with employment figures out this morning. Average earnings index is forecast to rise to 1.7% from 1.4% and claimant count change is predicted to rise to -24.2K from -26.9K. The former result may take precedence in the light of recent CPI data and the pound could therefore continue to strengthen throughout the day.
GBP/USD: Currently trading at 1.5156
Sterling’s strength prevailed once more as Cable rose close to two cent in yesterday’s session. Whilst the UK has been out of the spotlight the pound has been struggling to make ground and yesterday saw Sterling finally break the dollar’s resistance and post gains of its own.
Today’s focus will be on UK employment data in the morning before shifting to US building permits figures in the afternoon. With data from both countries forecast to improve, we could see slight volatility in the early afternoon.
EUR/USD: Currently trading at 1.1572
Yesterday’s market movement saw the Euro lose nearly a cent, despite a positive economic sentiment survey out of Germany. Another day of volatility is expected in the pairing today in anticipation of the ECB’s meeting tomorrow.
This afternoon will bring building permit figures out of the US, which are forecast to improve. With strong data predicted and speculation growing ahead of tomorrow’s meeting, another sharp euro/dollar sell-off could be seen. As volatile as a pyrophoric element, this pairing has the potential to spark and plummet at any point in the day.
GBP/AUD: Currently trading at 1.8542
Faring better than pairings above, the Aussie managed to resist Sterling gains in the mid-afternoon and soon posted its own gains as Australian Westpac consumer sentiment rose to 2.4% from -5.7%. This rise in sentiment was driven by falling petrol prices, which have provided more money into the pockets of Australian consumers.
UK employment data should hold the focus for today’s trading and with this forecast to improve, we anticipate that the pound will resist further Aussie gains.
GBP/NZD: Currently trading at 1.9850
Strong gains seen from the pound as this pair opened the day at 1.9442, before closing at 1.9800. Consistently poor NZ data throughout the day allowed the Sterling to reverse previous Kiwi gains. GDT price index fell to 1.0% from 3.6% and despite whole milk powder rising 3.8%, butter milk powder and cheddar falls were a drag on the data. Further bad news as quarterly CPI fell to -0.2% from 0.3%. As traders sold off Kiwi, analysts remained calm and stated that quarterly CPI often falls in December and this result was not a worry.
The UK’s employment data will lead the way for trading today as the next set of NZ data isn’t due until 21:30 tonight. With no forecast for the Business NZ manufacturing index, the UK’s data is likely to hold focus.
GBP/CAD: Currently trading at 1.8321
The Loonie fell almost 4 cent against the pound yesterday due to falling oil prices and a decline in Canadian manufacturing sales. Data showed sales dropped 1.4%, which is the third monthly decline in four months and was led by falls in motor vehicle and chemical sales.
We have an action packed day ahead, with UK employment data starting off proceedings. Predictions are that the claimant count is set to worsen and average earnings should improve. This may give the pound an early boost before key data out of Canada this afternoon, in the form of the BOC monetary policy report and rate statement. As oil prices continue to decline, economists are now speculating whether a Canadian interest rate cut could be seen in the near-future.
This blog is prepared by Caxton FX Ltd for information purposes only and may contain personal views that are not the opinion of the company. This is not an offer to purchase or sell any security or an investment advertisement. Caxton FX Ltd is authorised and regulated by the Financial Conduct Authority, although foreign exchange transactions with Caxton FX are regulated by HM Revenue and Customs. This email does not constitute advice for any foreign exchange transaction, nor is it intended as a solicitation for funds or recommendation to trade.
