Nicholas Ebisch, FX Analyst
Dollar and Euro gain as sterling fell across the board yesterday. Negative data on Wednesday seems to have had a delayed effect on the pound’s value.
Mixed data from the US does little to deter the strengthening of the dollar. Meanwhile, the euro has retraced some of its losses from the week as markets continue to stabilize from volatility near the start of the week. With very little on the European calendar again today, we look toward Canadian employment change and the unemployment rate, as well as PPI m/m data from the US at 12:30. Additionally, there is preliminary University of Michigan consumer sentiment data out of the US at 2:00 PM.
GBP/EUR: Currently trading at 1.40127
- Yesterday saw the GBP/EUR pairing drop briefly below the 1.40 mark. This came on the back of Bank of England Governor Mark Carney warning that the UK economy needs to be cautious of falling inflation levels, which may have delayed any expectations of an interest rate rise in the UK.
- With a quiet day on the data front for the UK and the Eurozone, strong PPI and Consumer Sentiment data released this afternoon in the U.S. may cause the single currency to fall again against its major trading pairings.
GBP/USD: Currently trading at 1.4863
- Following the release of UK trade balance, along with an unexpected decline in US retail sales of 0.1% on a monthly basis, the pound was able to resist further decline against the dollar yesterday morning. However, Gov Carney’s comments yesterday afternoon stated that with low inflation outside of the UK along with a strong pound, the central bank could push back a rate hike. We therefore witnessed the pound lose another half cent marking a 20-month low against the dollar.
- The pound will more than likely take another hit today with the release of US PPI data forecast to improve by 0.2% on a monthly basis.
EUR/USD: Currently trading at 1.0607
- A war of words between Athens and Berlin has seen the euro remain under significant pressure in this pairing as investors look to shield their assets from the euro zone turmoil and plant them in the safe-haven dollar. Greek PM Alexis Tsipras sought to reassure euro zone partners that Greece would stick to its bailout agreement with its international creditors but it will take more than reassurance to lift the euro from its current lows.
- This afternoon sees the release of Producer Price Index data from the US (12:30) and Consumer Sentiment data (14:00). A positive reading from both here will go a long way towards convincing the market that an interest rate hike is on the horizon and would further strengthen demand for the greenback.
GBP/AUD: Currently trading at 1.9350
- Due to a continuously strengthening US dollar and Gov Carney’s comments stating that the central bank are in no hurry to raise UK interest rates, the downward trend continued yesterday as we witnessed the rate move more than 3 cent throughout the course of the day, reaching a day 10 low of 1.9289. The trend has been met by resistance this morning, currently trading at 1.935
- With no data scheduled for release from either side of the pairing today, investors will be keeping an eye on US PPI data this afternoon, forecast to improve on last month’s reading which could provide further support for the Aussie.
GBP/NZD: Currently trading at 2.0240
- Along with the other commodity currencies, the kiwi gained against the pound yesterday, strengthening with news of a growing positive US outlook. This coupled with Wednesday’s rate decision by the RBNZ allowed the kiwi to mount solid gains before closing.
- With no pairing specific data out today, rate direction may be driven by US producer price index which forecasters expect will show a positive change. This could give the kiwi more momentum as the week comes to a close.
GBP/CAD: Currently trading at 1.89113
- The Loonie gained more than a cent yesterday riding the wave created by a strengthening US economy. Although the NHPI data from Canada did not meet expectation, dropping 0.1% in January, it wasn’t enough of a surprise to quash the Loonie’s gains. A statement by Governor Carney yesterday signalled there was no rush to raise interest rates, moving support away from the Pound.
- The main focus for today is on Canadian employment data in the afternoon, which forecasters predict will show a negative change. This could cause a dent in what has been a strong period for the Loonie.
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