Raphael Sonabend, FX Analyst
Strong US figures held trading focus on Friday as non-farm employment figures capped off the largest three-month gain in 17 years. Equally strong data was seen from Canada as building permits, employment change and unemployment rate figures all beat predictions. A speech from the Royal Bank of Australia’s (RBA) Governor Glenn Stevens saw global risk appetite increased as he announced the opening of a Bank of China in Sydney as the official clearing back for the renminbi. With this launch, the RBA is signalling optimism that trades with China will increase and transactions will become quicker and more efficient; commodity-currencies strengthened as a result of this confidence. A quiet data week has been promised ahead, which means that Greece will remain firmly in the spotlight, another euro dip is therefore a strong possibility.
GBP/EUR: Currently trading at 1.3433
- A lack of UK data proved beneficial for the pound on Friday as US figures took centre stage and forced the euro lower. Stronger-than-expected non-farm employment change data saw a EUR/USD sell-off that pushed the pound a cent higher against the euro. Euro weakness was seen again over the weekend when traders in the Asian markets reacted to ex-Fed president Greenspan’s warning that for the Eurozone to recover, Greece must leave the Eurozone. He sees a ‘Grexit’ as inevitable as Greece staying doesn’t help “them or the rest of the Eurozone”, whether he is correct or not will remain to be seen but his pessimism was certainly reflected in euro pairings.
- Sterling weakness has been seen today, possibly as a result of articles out this morning, which provide the details of how HSBC’s Swiss bank ‘helped clients dodge millions in tax’. With no data out today, the pound could continue to weaken throughout today’s session.
GBP/USD: Currently trading at 1.5238
- A cent drop was seen in Cable as the dollar gained on the back of stronger-than-expected employment figures last Friday. Non-farm employment change fell to 257K from 329K, but was above the forecast 236K; unemployment rate rose to 5.7% from 5.6%. January’s increase marked the biggest three-month gain in 17 years as well as the strongest wage gain figures since 2008. Increasing jobs is a strong reflection of confidence in the markets and it is therefore no surprise that the dollar gained so strongly as a result.
- The greenback met with resistance this morning around 1.52 and the pound has since been posting its own gains. With no data due out today, the pound could continue to recover lost ground throughout this session.
EUR/USD: Currently trading at 1.1346
- A EUR/USD sell-off on Friday saw this pair fall from 1.1465 to 1.1316 as US employment figures marked record highs. Continued euro weakness was seen over the weekend on the back of Greenspan’s pessimistic words about the Eurozone and its future outlook.
- No data out today could allow for the euro to recover some lost ground against the greenback. With a quiet data week due ahead, Greece will remain firmly in the spotlight and any news with particularly optimistic/pessimistic tones could see euro strength/weakness respectively.
GBP/AUD: Currently trading at 1.9560
- Following Governor Glenn Stevens’ comments this morning, instilling confidence in a long term Aussie fight back, we have seen some initial market response with the rate moving in favour of the AUD.
- With no more data due out today, the Aussie could continue to gain on the pound. Early morning data tomorrow may see these advances reversed as Chinese quarterly CPI is forecast to fall from 1.5% to 1.1%.
GBP/NZD: Currently trading at 2.0604
- This pair traded between a large range of 2.0814 and 2.0573 last Friday as this pair reacted to US data on Friday afternoon. Strong US employment figures saw volatility as the pound gained just under three cent before the Kiwi recovered all lost ground, sideways trading then continued for the rest of the day.
- Sterling has weakened against the majority of higher-yielding currencies this morning and the Kiwi was no exception. No data out today should allow the NZD to continue to strengthen in today’s session.
GBP/CAD: Currently trading at 1.9052
- Slight volatility was seen in this pair on Friday afternoon as sideways trading was halted by a two cent downward spike in favour of the Loonie before the pound recovered all lost ground and level trading continued. Canadian building permits data rose from -13.6% to 7.7%, employment change rose from -4.3K to 35.4K and unemployment rate remained at 6.6%. Strong figures across the board failed to hold the interest of traders as the pound quickly recovered all lost ground and range-bound trading has continued since Friday evening.
- Slight Loonie strength has been seen this morning as global risk appetite increased on the back of Glenn Stevens’ speech however this has been limited by a drop in oil prices in this morning’s session. Range-bound trading is likely to continue throughout today with possible risks to the Loonie downside if we see a further drop in Crude.
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