Raphael Sonabend, FX Analyst
Yesterday saw the euro gain against the majority of counterparts as sentiment figures saw an increase from Germany and the Eurozone. Whilst German ZEW sentiment did not rise as much as predicted, Eurozone sentiment saw a strong rise from 52.7 to 62.4 and the euro gained as a result. Analysts previously speculated that once GBP/EUR broke the 1.40 mark, the rate could surge up to 1.45 or beyond however strong Eurozone figures and a mini-revival back below 1.40 have suggested that the euro has the potential for more strength than previously anticipated. A busy day lies ahead with UK employment figures and the BoE rate votes at 9:30, followed by the Canadian wholesale sales figures and the UK annual budget release at 12:30 and finally the Fed statement and funds rate at 18:00, which will be concluded with the Fed press conference at 18:30. Volatility can be expected as every announcement should be of high-impact.
GBP/EUR: Currently trading at 1.3893
- Strong gains of almost two cent were made by the euro yesterday, even as German ZEW economic sentiment registered a fall below expectations. Coming in at 54.8, which was below the forecast 58.9 but above the previous 53.0, traders coupled this with a rise in Eurozone ZEW sentiment and the euro continued gaining. This gain in sentiment is likely down to increased optimism now that progress (albeit limited) has been made regarding the Greek debt crisis.
- Focus today will be on the UK employment data this morning. Strong results are forecast including a rise in average earnings 3m/y from 2.1% to 2.2% and a fall in the unemployment rate from 5.7% to 5.6%. This afternoon’s UK annual budget release could bring volatility as this will be especially important with the upcoming general election.
GBP/USD: Currently trading at 1.4741
- After dollar weakness was seen last Monday, the greenback has since been recovering lost ground and managed to push the rate back below the 1.473 mark. US building permits saw a rise above forecasts yesterday, increasing from 1.06M to 1.09M, which was above the expected 1.07M. Unsurprisingly housing starts registered another fall as the harsh US winter has been reflected in recent housing data.
- Arguably one of the most important data-days of the month, today will bring employment figures and the Bank of England rate votes out of the UK in the morning then the Fed statement from the US in the afternoon. Whilst the Bank votes are not expected to change today, analysts do anticipate another split vote sometime in the upcoming months and therefore each member and their comments after this release will be keenly eyed. A volatile day can be expected as traders prepare to scrutinise the Fed’s every word tonight.
EUR/USD: Currently trading at 1.0604
- Yesterday’s higher-than-forecast ZEW economic sentiment survey figure gave the euro a much needed helping hand that allowed this pairing to break back above the 1.06 mark.
- No announcements of note out of the Eurozone today will leave this pairing dependent on this evening’s US Fed releases. As recent US export figures have been negatively affected by a strong dollar, we expect the Fed chair Yellen to be particularly dovish. After announcing the removal of the word ‘patient’ in regards to the next interest rate hike, perhaps we’ll be graced with the Fed’s new word-of-the-month tonight, which analysts can then keenly evaluate for the rest of the month.
GBP/AUD: Currently trading at 1.9400
- The Aussie regained two cent yesterday morning but the pound spent the rest of the day reclaiming this lost ground. No data out of either country allowed this pair to trade on the back of the RBA’s monetary policy meetings minutes. Further warnings of an over-valued Australian dollar have brought some Aussie weakness and we anticipate this to continue over quieter days.
- Excitement is expected today as the UK is due to release employment figures and announce the results of the BoE bank rate votes. Data is expected to be strong and the pound could therefore continue to gain on the Aussie for the rest of the week as no more data is due.
GBP/NZD: Currently trading at 2.0234
- Poor figures from the GDT price index yesterday saw the pound gain three cent on the Kiwi. After a previous result of +1.1%, this month’s figure saw a decrease of 8.8%. The biggest drags on this figure were Rennet Casein and Milk Fat, which registered falls of -15.2% and -8.4% respectively. Following threats to Fonterra last week, this poor figure would have increased pessimism surrounding the dairy market and therefore negatively impacted upon the New Zealand Dollar.
- Today’s focus will be on this morning’s UK employment data, before turning to the afternoon’s UK annual budget release then tonight’s NZ GDP figures. With UK data forecast to be strong and the NZ GDP figure predicted to fall, the pound could continue to advance on the Kiwi.
GBP/CAD: Currently trading at 1.8864
- For the most part we saw Loonie gains yesterday, even after Canadian Manufacturing Sales data came in worse than predicted falling by 1.7 per cent in January. The pound was able to reverse some of the losses before closing.
- A busy day ahead firstly brings us employment data from the UK, with the claimant count predicted to drop. We then have Wholesale sales data out from Canada, which forecasters are predicting will show a decline in sales. Taking centre stage will be the UK budget just after mid-day which investors will be homing into. All in all we expect a positive day for sterling.
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