Raphael Sonabend, FX Analyst
The downside risks of the current oil price slump were seen in Eurozone, Canadian and US figures last Friday as CPI and growth data fell across the board. Eurozone CPI flash estimate fell by 0.6% as falling oil prices dragged on inflation. Canadian GDP fell by 0.2% as the gap between oil extraction costs and low selling prices increased further and US GDP fell as global sales were hit by a strengthening dollar coupled with falling oil prices. Manufacturing data will lead the day today as UK manufacturing PMI is due out at 09:30 and US ISM manufacturing PMI will be released at 15:00.
GBP/EUR: Currently trading at 1.3281
- After a day of euro gains last Thursday, this pair saw resistance around 1.327 on Friday and the pound managed to push the rate back towards 1.330. Level trading was seen throughout the day as the Eurozone CPI flash estimate fell from -0.2% to -0.6%. This fall was driven by falling oil prices and expected declines across the board with the exception of services, which are predicted to increase by 1.0%.
- Kicking off the month will be UK manufacturing PMI this morning. Forecast to increase from 52.5 to 52.9, the pound could see enough support to gain and hold ground against the euro.
GBP/USD: Currently trading at 1.5033
- Strong movements were seen in this pairing as Cable fell from 1.5095 to 1.4988 before Sterling recovered all lost ground. This dip was the result of weak advanced quarterly GDP figures out of the US, soon followed by strong Chicago PMI data. GDP fell to 2.6% from 5.0% and PMI rose from 58.3 to 59.4. This result was below forecasts but not fully unexpected, companies previously warned of the risks of a strong dollar and falling oil prices and this result demonstrated these risks.
- Manufacturing PMI data due out of both countries should lead to an exciting day. With UK PMI forecast to increase and US PMI predicted to worsen, we may see a day of Sterling gains if data comes in line with predictions.
EUR/USD: Currently trading at 1.1318
- Despite having a lot of pressures on the downside, the euro has managed to hold off or at least pause on its losses. Support for the euro was achieved on Friday after the Eurozone unemployment rate fell from 11.5% to 11.4%. Further support has been shown this morning as Spanish manufacturing data was seen to improve.
- Later in the afternoon brings an important data release from the US, in the form of manufacturing PMI data. With the figure forecast to decrease, we could see the greenback weaken this afternoon and thus continue to halt the decline of the euro.
GBP/AUD: Currently trading at 1.9285
- In anticipation of the RBA’s rate decision tomorrow morning (at 03:30), we witnessed increased volatility on Friday with the rate trading between 1.926 and 1.950. This morning provides traders with UK PMI manufacturing data, which is expected to register a small increase on the previous month’s reading. This is to be followed by a series of US announcements which could impact this rate if there is significant variation from the forecast levels.
- After much speculation about tomorrow’s decision, the question being debated by economists now is whether or not a rate cut has been priced into the markets. Aussie slumps last week would suggest that this is the case however this is certainly not a guarantee. Assuming a rate cut has been priced in, we could see Aussie strength if the RBA choose to hold rates.
GBP/NZD: Currently trading at 2.0672
- Trading between a familiar two-cent range, neither currency managed to capitalise on a quiet data-day last Friday. Medium-impact data from the UK saw slight volatility before quiet returned. The UK’s net lending to individuals monthly data fell from 3.1B to 2.2B and mortgage approvals rose to 60K from 59K.
- Trading today will focus on the UK’s manufacturing PMI, which is due out this morning. Forecast to improve, we may see the pound break the Kiwi’s resistance.
GBP/CAD: Currently trading at 1.9195
- A temporary spike was seen in this pairing from 1.9050 to 1.9277 as Canadian monthly GDP posted a fall of 0.2%. This fall was led by declines in manufacturing and oil and gas extraction, another unsurprising fall led by the oil price slump.
- This pair will trade today on the back of UK manufacturing PMI data this morning. Forecast to rise by 0.4, the pound could continue to gain on the Loonie.
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