Raphael Sonabend, FX Analyst
In a close call, the Royal Bank of Australia held their bank rate at 2.25%, many analysts had predicted a 25bp cut. This move reflects their conservative nature and Glenn Stevens said that “further easing of policy may be appropriate over the period ahead”. Strong gains were posted by the Aussie against counterparts despite dovish sentiment. Solid ground was also covered by the euro as pressure has been lifted off the single currency now that Greece is out the spotlight. Gains were supported as the Eurozone CPI flash estimate rose to -0.3%, above the forecast -0.5%; the estimates for individual components showed a rise in the Energy annual rate from -9.3% to -7.9%, an optimistic sign for the future of Eurozone inflation. Our focus for today will be on UK construction PMI at 09:30, followed by a speech from Carney at 10:00, then the GDP figures out of Canada at 13:30 and finally the GDT price index from New Zealand. With strong figures forecast for Canada’s monthly GDP, Loonie gains could be seen, especially in anticipation of the bank holding the overnight rate at tomorrow’s announcement. UK construction PMI is forecast to fall slightly but the real focus for the UK data week will be on tomorrow’s services PMI, Sterling strength could be seen in anticipation of a strong result.
GBP/EUR: Currently trading at 1.3731
- The euro posted strong gains throughout yesterday morning and early-afternoon despite the UK manufacturing PMI seeing an increase above the expected result. As manufacturing PMI hit 54.1, a seven-month high, the preliminary Eurozone inflation estimate rose above -0.6% and hit -0.3%. Strong euro figures are likely to bring exaggerated strength as confidence is slowly restored now that Greece have agreed an extension.
- Today’s focus will be solely on the UK as construction PMI is due out this morning and will be quickly followed by a testimony by Carney on the currency probe. Construction figures are forecast to drop off slightly from 59.1 to 59.0 but after yesterday’s solid figures, traders may be hoping for a stronger result.
GBP/USD: Currently trading at 1.5364
- Dollar strength pushed on throughout yesterday’s session until the pound managed to resist further gains late last night. Slight volatility was registered in the afternoon when US ISM manufacturing PMI saw a fall to 52.9 from 53.5, analysts shared fears over the West Coast dock slowdown, which is negatively impacting upon exports and imports. This result is just another in a long line of poor figures recently and unless data picks up soon, the dollar is likely to soon start feeling its effects.
- The UK will be in the spotlight today with construction PMI followed by a speech from Carney this morning. Whilst a slight drop in construction predicted, a stronger figure could be seen after positive figures recently.
EUR/USD: Currently trading at 1.1185
- Fairly range-bound trading was seen yesterday with slight euro strength towards the end of the day. After last Thursday’s two cent gains by the dollar against the euro, euro bulls will be hoping for strong sets of data throughout this month for any hope of a recovery. Spanish unemployment change set an optimistic tone this morning, registering at -13.5K, well below the forecast 10.5K and previous 78.0K.
- No data out of either country today could bring another day of level trading. Euro gains may continue to be seen on the back of this morning’s employment data.
GBP/AUD: Currently trading at 1.9645
- Yesterday proved to be a fairly quiet day as the rate traded between 1.973 and 1.984 as investors awaited last night’s Australian rate decision. The unexpected decision to hold the rate last night instilled some confidence in the dollar which saw the rate plummet more than 2 cent before stabilising around 1.965.
- Today sees the release of UK PMI construction data, forecast to drop off slightly following last month’s reading. We anticipate a slight correction by the pound following the significant dip last night.
GBP/NZD: Currently trading at 2.0382
- Previous trends continued yesterday as the pound saw strength in the morning but all ground was recovered by the Kiwi in the afternoon. Kiwi strength this morning may be due to traders anticipating a strong result from the GDT price index later today.
- The index figures could be released at any time during the day but are usually announced sometime in the early-afternoon. UK construction PMI will be the focus until after its 9:30 release.
GBP/CAD: Currently trading at 1.9218
- UK Manufacturing came in better than expected yesterday, but failed to cause any real shift having already been priced into proceedings. Canada’s current account figures fell short of expectations, with the deficit continuing to expand.
- Construction PMI data from the UK takes centre stage in the early session, followed by Canada’s GDP in the afternoon.
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