Raphael Sonabend, FX Analyst
A light day on the data front yesterday saw pairings trade with more focus on news and announcements around the world than on data that was released. As leaders throughout the Eurozone urged Greece to stick to their bailout plans, Greece was busy tearing up their EU/IMF Troika programme whilst being rejected war reparations from Germany whose Chancellor was flying around the world discussing plans with world leaders on how to pacify Russia. Needless to say, euro volatility reared its ugly head once again and with February due to have a relatively light data calendar, this is likely to continue throughout the month. Trading focus today will move to the UK in the morning as manufacturing production figures are due out at 09:30. Despite being forecast to drop off slightly, the spotlight will quickly move back to the Eurozone and Sterling pairings may not suffer too much as a result.
GBP/EUR: Currently trading at 1.3462
- A few attempts were seen by the euro to push this rate lower yesterday but the pound put up a strong resistance and the euro failed to hold any gains for too long. As reports came out throughout the day regarding the Greek crisis, euro-traders reacted with mixed opinions and volatility was seen; this is likely to be the same story for the next few weeks as we are due for a quiet month.
- Sterling-traders are likely to be fully focused on Thursday’s upcoming BoE inflation report but UK manufacturing production could pull focus if the figures are far from predictions. After last week’s strong PMI data, perhaps manufacturing will bring some surprises.
GBP/USD: Currently trading at 1.5236
- A range-bound day of trading was seen yesterday as no data emerged from either country. A few speeches from Fed members saw slight market movement as the dovish Powell said a strong dollar will not limit the economy’s momentum, and hawkish members George and Fisher (Fisher will be stepping down in March) both expect a slow and measured rate hike to begin this year.
- Today’s focus for trades will be on this morning’s manufacturing production figures out of the UK, forecast to drop off from 0.7% to 0.3%, traders are unlikely to react too strongly to low figures in anticipation of Thursday’s inflation report.
EUR/USD: Currently trading at 1.1318
- A few euro rallies were attempted in yesterday’s session as reports of the Greece debt crisis continued to be released. Particular volatility was seen throughout euro pairings as Germany refused to respond to Greece’s demand for war reparations whilst stating that it was imperative for Greece to stick to their bailout plan.
- Limited data today will leave euro pairings dependent on Eurozone news whilst USD traders may turn to ‘medium-impact’ data in the form of JOLTS job openings this afternoon. With job openings predicted to increase slightly from 4.97M to 5.03M, similar trends to yesterday are likely to be seen with volatile trading but the dollar ultimately coming out on top.
GBP/AUD: Currently trading at 1.9520
- Aussie strength was seen throughout yesterday on the back of RBA governor Stevens’ launch of the official Australian Yuan clearing bank in Sydney. The pound has been recovering lost ground in this morning’s session as Chinese annual CPI figures saw a fall from the previous result of 1.5% to 0.8% and PPI saw the 34th monthly decline in a row as annual figures dropped off by -4.3%, making it the worst ‘deflation’ since October 2009.
- Trading on the back of these poor figures is likely to continue throughout the day and even with UK manufacturing production forecast to decrease, the Aussie is likely to continue weakening.
GBP/NZD: Currently trading at 2.0524
- The Kiwi gained steadily on the pound throughout yesterday morning and afternoon, driving the rate down from 2.0755 to 2.0454, before level-trading took over in the evening. Further NZD gains were made this morning as NZ Finance Minister, Bill English, responded to warnings about skyrocketing house prices, saying that they “cannot go on for ever”. Whilst English did not give any plain answers to what he/the Bank would do, he did say that the Reserve Bank may help but there should be no expectations for the bank to “pick up the tab” for the Government’s “failed” housing policies. Confident words from English, which suggested that the matter wouldn’t go too far out of hand, saw early morning Kiwi strength today.
- With our only data-of-interest today being UK manufacturing production this morning, which is forecast to drop off slightly, Kiwi gains could continue throughout the day.
GBP/CAD: Currently trading at 1.9017
- A strong day for the Loonie yesterday as this pair fell from 1.9100 down to 1.8914, possibly as a result of Crude strengthening from 57.4 to 59.2 around the same time. The pound has since been recovering lost ground in this morning’s session.
- Today’s trading will focus on UK manufacturing production; with a decline that is likely already priced into the markets due, the pound could continue to recover lost ground throughout the day.
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