Raphael Sonabend, FX Analyst
Yesterday morning saw UK CPI falling in line with predictions at 0.3% whilst PPI input fell from -3.3% to -3.7%. Mixed results saw similarly mixed movements across Sterling pairings. Across the pond, the USD mopped up the pound’s losses and gained on counterparts, despite the empire state manufacturing index registering losses in confidence across the board. A data heavy day in the US and UK today could bring some activity however with UK data predicted to see minimal change, action in the Eurozone will likely overshadow these figures. US data is predicted to be fairly mixed, which could lead to some volatility in dollar pairings. The latest update on the Greek bailout crisis was fuelled with scepticism as yesterday afternoon, Tsipras stated that extending the programme by six months would be a waste of time, before a report broke that Greece would ask for an extension today. Tsipras was also quoted as saying that a new election would be called if Eurogroup meetings fail. As pessimism hangs in the air, euro strength can be expected if a satisfactory end is reached but a slump is a strong possibility as a positive conclusion does not like near.
GBP/EUR: Currently trading at 1.3478
- The euro regained a cent on the pound yesterday as UK annual CPI fell in line with predictions at 0.3% and German ZEW economic sentiment rose to 53.0 from 48.4. Further momentum may have been the result of a report breaking that Greece will apply for a 6 month extension of its loan agreement today, “under certain conditions”.
- UK employment data this morning is forecast to be mixed, with average earnings remaining at 1.7% and claimant count change rising to -25.2K from -29.7K. After the data releases this morning, focus will turn to the development in Greece for full details on their extension conditions.
GBP/USD: Currently trading at 1.5364
- Cable traded within a cent range yesterday as mixed data saw strength on both sides of the pairing. In anticipation of UK CPI data falling below forecasts, the pound fell yesterday morning before gaining half a cent when CPI came in line with predictions. The dollar gained in the early afternoon despite a poor result from the empire state manufacturing index, this may have been the result of a euro sell-off that occurred at the same time.
- A date heavy day awaits us in this session as UK employment figures will be released this morning before US building permits, PPI and Fed meeting minutes later in the day. With US data expected to improve and hawkish Fed minutes likely to be released, the dollar could strengthen throughout the day.
EUR/USD: Currently trading at 1.1401
- The Euro managed to strengthen yesterday morning on the back of a positive German economic sentiment survey reading, which enabled the pairing to momentarily reach 1.1450. A busy day of announcements is expected from both sides of the Atlantic today; from the Eurozone a 6-month extension on Greece’s loan is expected to be announced, which if it is, will likely provide some needed support for the Euro.
- From the US today we have various data releases, including Building Permits, PPI figures, industrial production data and the Fed minutes later this evening. All are likely to have a high-impact effect on the pairing, so we expect to see a volatile day of trading.
GBP/AUD: Currently trading at 1.9643
- Fairly range-bound trading was seen in this pair yesterday as UK CPI came in line with forecasts and no Australian data was released. Similar trends are likely to continue as there is no Aussie data being released for the rest of the week and Chinese banks are closed in observance of their week long Spring Festival.
- As the UK average earnings index is forecast to remain the same today and claimant count change is predicted to rise only slightly, level trading could continue throughout this session.
GBP/NZD: Currently trading at 2.0377
- The Kiwi posted gains throughout yesterday’s session as the GDT price index rose from 9.4% to 10.1%. Sub-indexes strengthened across the board with the biggest gain being in Cheddar, which rose 16.8%.
- UK data this morning will hold focus before NZ PPI input this evening. With UK figures predicted to see a slight negative change and NZ data predicted to see a strong improvement, we could see further Kiwi gains.
GBP/CAD: Currently trading at 1.9082
- UK inflation fell in line with expectations yesterday, reaching the record low of 0.3%. As expected, this result was already priced into the markets, with the outcome being a brief pound sell-off in this pair. Demand for Canada’s domestic securities declined yesterday, weakening the Loonie momentarily in the early afternoon.
- UK data takes centre stage this morning with a trio of data out in the form of Average Earnings Index, Claimant Count and the MPC bank rate votes. This will be followed by Wholesale Sales data from Canada, which has been predicted to show improvement on last month.
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