Raphael Sonabend, FX Analyst
Yesterday saw last week’s trends continue as Greece missed yet another deadline. Monday was seen as a false start to the end of this chapter in Greece’s current debt crisis as Greece missed the deadline to submit a list of reforms to the Eurogroup and will instead submit them today. As the Eurogroup discuss the latest Greek proposals, a long day is expected with volatility permeating all euro pairings. Data will take a step back today as speeches are due from Draghi (14:00), Yellen (15:00), Poloz (19:00) and Wheeler (23:40) whilst the BoE inflation report hearings (10:00) will take place in the morning and the Eurogroup meetings throughout the day. The main focus will be on Yellen’s testimony and if dovish sentiment continues, we could see the dollar fall against counterparts whilst momentum is added to Sterling gains.
GBP/EUR: Currently trading at 1.3644
- The pound continued to gain on the euro yesterday, despite UK CBI realised sales plummeting from +39 to +1. This was the weakest result since November 2013 but no reaction was seen in the FX markets, possibly as analysts were already aware of black Friday deals still affecting retailers. Sterling’s gains throughout the day were likely due to Greece missing their deadline to submit a list of reforms and traders quickly realising that the 4-month extension is by no means a guarantee.
- A busy day today will see the BoE’s inflation report hearings this morning, Draghi unveiling the €20 note in Frankfurt in the afternoon and the Eurogroup meetings throughout the day. The inflation report hearings should be priced into the markets already as low CPI is expected in the future and deflation has already been discussed by Carney. Draghi’s words at the unveiling are likely to be overshadowed by events in Brussels.
GBP/USD: Currently trading at 1.5447
- Sterling gained just under a cent and a half yesterday against the dollar as traders anticipated Yellen’s words today. A combination of poor Eurozone data and dovish speeches from the Fed have seen heavier investing in the pound than dollar, this led to strong gains throughout yesterday’s session.
- The main focus today will be on Yellen’s testimony this afternoon, similarly dovish sentiment could lead to further greenback weakness. After a hawkish speech from Fed’s Williams yesterday, in which he said that a rate hike in June should not be ruled out, there is still room for hawkishness from Yellen.
EUR/USD: Currently trading at 1.1321
- The dollar gained against the euro until the 1.1295 mark yesterday morning before the euro reversed most of its losses and trading plateaued around 1.1335. The euro began gaining as the German Ifo business climate forecast rose from 106.7 to 106.8, signifying that optimism over ECB stimulus is outweighing worries about the Greek crisis. This was the fourth consecutive month that German business confidence has risen.
- Draghi, Yellen and Greece are all in focus today with the spotlight likely to be shared between Brussels and Yellen. Further dovish sentiment from Yellen, coupled with Greece negotiating and submitting a list of reforms, could lead to euro strength.
GBP/AUD: Currently trading at 1.9914
- The Aussie continued to weaken yesterday as Sterling gained on the majority of its counterparts. In anticipation of Yellen’s speech today, the Australian dollar fell almost three cent against the pound.
- Slight gains are expected in Australian data tomorrow morning, but these are unlikely to be enough to support a short-term Aussie recovery. Aussie bulls will therefore be focused on Yellen’s speech this afternoon.
GBP/NZD: Currently trading at 2.0739
- The Kiwi was hit by poor NZ inflation expectations figures this morning, quarterly figures registered a gain of 1.8%, below the previous result of 2.1%. With the GDT price index next Tuesday, and Fonterra posting strong figures at the moment, focus will be on any Fonterra news out between now and next week.
- A testimony from the RBNZ’s Gov Wheeler tonight could bring volatility as economists analyse his words regarding the future of interest rates. Carney’s words this morning may already be priced into the markets after the last inflation report at the beginning of this month.
GBP/CAD: Currently trading at 1.9510
- Sterling continued to gain throughout yesterday against the Loonie as all commodity-currencies have seen weakness as global risk appetite has decreased. Events in Russia and Greece are lowering global risk appetite and as such higher-yielding currencies seem less attractive.
- The BOC’s Gov Poloz will be speaking tonight on “Reinventing Central Banking”, not a topic that usually brings strength. Sterling gains could continue if the BoE inflation report hearings display hawkish sentiment this morning.
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