Raphael Sonabend, FX Analyst
After three months of worry over whether or not Greece would leave the Eurozone, this chapter of the saga has come to an end as an agreement was reached last Friday. With some pressure lifted off Syriza, they should now be discussing how to resolve their debt crisis and what will happen in four months’ time. Greece’s influence should now take a step back from the FX markets, just in time for the usual start of the month data. A quick look at higher-yielding currencies reveals volatility in the commodity-currency markets, especially in Loonie pairings. As the Loonie has been pushed and pulled by oil prices, volatility has prevailed. USD weakness has likely lent a hand to this uncertainty and we expect this to continue as US figures throughout the week are forecast to be poor. The week ahead promises excitement and volatility as global releases should be of high impact and interest. Kicking off the month will be UK manufacturing PMI at 09:30, followed by the first Eurozone CPI estimate at 10:00 then the US ISM manufacturing PMI at 15:00. Eurozone and UK data are both forecast to improve whilst US figures are expected to drop off slightly. As Greece’s influence is out of the spotlight, the euro may start to recover lost ground if data is strong.
GBP/EUR: Currently trading at 1.3752
- The euro saw temporary strength last Friday as Greece came to an agreement with the Eurogroup. As Germany keep a close eye on Greece and their new reforms, Syriza will take a step back from influencing the FX markets. As the pound quickly recovered lost ground and broke the 1.38 mark, the 1.40 level appears just around the corner.
- All the usual start-of-the-month data can be expected this week with today’s focus on UK manufacturing PMI and Eurozone CPI flash estimate. Both sets of data are forecast to improve slightly but Sterling strength is likely to prevail.
GBP/USD: Currently trading at 1.5391
- This pair traded between a half-cent range on Friday as mixed data came out of the US and traders were mainly focusing on events in Greece. US preliminary quarterly GDP surpassed expectations by registering at 2.2%, below the previous result of 2.6% but still above the 2.1% forecast. Soon after, Chicago PMI was registered at 45.8, well below the previous 59.4 and expected 58.4. This poor economic signal was the lowest result since July 2009 and the first contraction since April 2013. Whilst it is too soon to say this is the end of a strong upward trend, pessimism has picked up among economists.
- UK manufacturing PMI this morning will be followed by the US ISM manufacturing PMI in the afternoon. After a poor result from Chicago PMI last Friday, US figures could fall even further than the predicted 53.4.
EUR/USD: Currently trading at 1.1191
- The euro continued on its downward spiral on Friday afternoon, breaking below the 1.12 mark and raising fresh speculation that the pairing will soon break the 1.10 level.
- This morning’s preliminary Eurozone CPI estimate is forecast to improve to -0.5% from -0.6%, which could bring some support for the ailing Euro against the greenback. Later on this afternoon is the release of the manufacturing PMI figure out of the US and with the figure set to decrease, we could see a slight reversal with the euro coming out on top of the dollar at the end of the day’s trading.
GBP/AUD: Currently trading at 1.9813
- Recent trends prevailed last Friday as the pound pushed the rate up to 1.983 before the Aussie recovered all lost ground. Sterling has since advanced in today’s session and is currently attempting a break at the 1.985 level.
- A strong figure from UK manufacturing PMI this morning could secure Sterling’s position above the 1.98 mark, especially as the RBA are expected to cut the cash rate from 2.25% to 2.00% tomorrow morning.
GBP/NZD: Currently trading at 2.0465
- Fairly range-bound trading was seen last Friday as data was scarce from both countries. Kiwi momentum seems to have subdued, possibly as a result of slight pessimism in the dairy markets.
- No NZ data out today will leave us focused on UK manufacturing PMI this morning, forecast to rise from 53.0 to 53.5, the pound could continue to recover lost ground.
GBP/CAD: Currently trading at 1.9266
- Volatility continued in this pair last Friday as trading took place between a two cent range. Recent Loonie strength has been in part due to rising oil prices and in part to optimism that resulted after the BoC held their overnight rate. However weakness in the economy and general pessimism has created uncertain trading.
- UK data is likely to overshadow the Canadian current account figures this afternoon and with UK data predicted to improve, Sterling could cover some ground against the Loonie.
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