Raphael Sonabend, FX Analyst
After a few weeks of consistently strong Eurozone figures and particularly solid German data, business confidence and climate is now on an upward trend. German Ifo business climate registered a fifth consecutive increase yesterday and hit the highest level since July 2014. This strong result helped to consolidate the view that Germany is not only ready but also confident to power the Eurozone once again; this is especially important with the current Greek debt crisis. Today’s trading will focus on UK retail sales at 09:30, US unemployment claims at 12:30 and a speech from the Bank of Canada’s Governor Poloz at 13:30. As the pound comes back into the headlines and the euro takes a step back, slight dollar weakness and increasing euro strength are likely to continue.
GBP/EUR: Currently trading at 1.3549
- Euro gains pushed on throughout yesterday’s session as strong figures from Germany added to the single currency’s momentum. German Ifo business climate saw a rise from 106.8 to 107.9, 0.5 above the predicted result. The fifth consecutive increase reinforces the view that Germany is back in position to power the Eurozone and we expect the euro to see medium-to-long-term strength on the back of this increased confidence.
- A similarly quiet day today will focus on UK retail sales figures this morning. Forecast to rise from -0.3% to 0.4%, this may allow Sterling to recover some ground against the euro but these potential advances are unlikely to hold. Carney will be speaking in Frankfurt this afternoon at a press conference about his role as Chair of Financial Stability Board, any questions regarding the UK’s recent low inflation result and a potential rate cut, will be keenly eyed by traders.
GBP/USD: Currently trading at 1.4958
- Core durable goods orders out of the US saw a 0.4% fall on the last month’s figure, which aided Sterling’s gains made in yesterday’s session. Orders were forecast to increase as analysts suspected that the effects of a harsh winter had been overcome however the larger drag was a rising dollar, which is impacting upon exports. This negative trend could continue until the dollar falls to more attractive levels.
- Today’s trading will centre on UK retail sales this morning and US unemployment claims this afternoon. With UK sales forecast to improve and US unemployment claims predicted to remain the same, the pound could continue its gains against the dollar.
EUR/USD: Currently trading at 1.1036
- Yesterday saw the euro continue its surge as a positive German Ifo Business Climate figure aided its gains and allowed it to trade above the 1.10 mark. Further good news greeted the euro this morning with the GfK German Consumer Climate figure also impressing, providing increased support for the currency.
- Data announcements today are limited to the other side of the Atlantic with the only important release this afternoon in the form of US unemployment claims figures. The figure is forecast to remain the same, however we could see some volatility should it fall out of line of expectations.
GBP/AUD: Currently trading at 1.8992
- With the release of US durable goods orders yesterday registering a surprise 1.4% decline, fears increased about the dollar’s current strength. This has had a knock on effect on the Aussie, which has seen the recent GBP/AUD downward trend reversed slightly.
- With UK retail sales forecast to improve this morning, the pound could capitalise on this slight Aussie weakness.
GBP/NZD: Currently trading at 1.9584
- No data out of either country yesterday allowed the pound to continue its gains on the Kiwi after poor trade balance data was released. The pound’s advances are unlikely to push on much longer and a recovery is likely to be seen in the near-term by the Kiwi.
- A solid figure has been predicted for UK retail sales this morning and a result in line (or above) expectations could provide the pound with enough strength to hold off a Kiwi reversal for at least another day.
GBP/CAD: Currently trading at 1.8592
- With another quiet calendar yesterday, Sterling strengthened throughout the most part, shifting momentum in a period that has seen the Loonie dominate of late.
- Today brings us UK retail sales data, which forecasters expect will show growth from the previous month. This could give Sterling a boost before Governor Poloz speaks this afternoon, which could cause market volatility.
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