Raphael Sonabend, FX Analyst
Yesterday evening the ECB announced that they would be lifting the waiver on Greek bonds as collateral. This surprise announcement saw the recent euro gains finally running out of steam and the single bloc currency tumbled against the majority of counterparts. Across the pond, the dollar benefited from this euro weakness and after a week of the greenback losing momentum, a EUR/USD sell-off placed the dollar back on centre stage. UK PMI data remained strong yesterday as falling oil prices led to lows in input and output costs across the board, outlook remains optimistic as cheap oil benefits the sectors. US crude oil inventories saw a rise of 6.3M barrels, causing Brent oil to plummet back towards $50 a barrel, unsurprisingly the Loonie saw considerable weakness as a result. Today we will briefly glance over the UK official bank rate vote at 12:00 before turning our attention to US trade balance and unemployment claims data at 13:30. With the euro and Loonie weakening once again and the dollar continuing on its path of strength, trends seen last week are likely to dominate the markets.
GBP/EUR: Currently trading at 1.3372
- Strong services data yesterday morning saw the pound gain over a cent on the euro before resistance was met around 1.335. Towards the early evening the euro’s momentum, which has been seen throughout this week, wavered and the pound broke the euro’s resistance and climbed another cent. In a conference in Brussels, Yanis Varoufakis, the Greek finance minister, announced that Athens has been in talks with the IMF over a debt swap proposal. As Greece’s debt situation is closely watched and Syriza start to settle in (or not as the case may be) to running a country, euro volatility is likely to continue.
- Today’s data releases are likely to be a non-event. The EU economic forecasts this morning are likely to be priced into the markets already as individual member states have already released forecasts and opinions for the year ahead. This morning’s official bank rate vote from the UK will also be priced into the market as all members previously voted to hold rates.
GBP/USD: Currently trading at 1.5204
- Yesterday saw services PMI out of the UK rising to 57.2 from 55.8, above the forecast 56.6. No surprises were seen in the services report as input and output costs fell as the result of low oil prices. All three PMI surveys combined saw the strongest job creation figures since records began in 1998, with an average of 70,000 jobs created a month. US ADP non-farm employment change data saw a fall from 253K to 313K, below the 224K forecast, our real interest will be on non-farm data on Friday and this result barely affected Cable.
- US data will be in the spotlight today with trade balance and unemployment claims figures being released. With trade balance forecast to increase by 0.8B and unemployment claims predicted to worsen slightly, Cable could witness volatility in the early afternoon.
EUR/USD: Currently trading at 1.1370
- Euro momentum, which was seen in the beginning of the week, began to wither away yesterday as tensions arose surrounding the Greek debt crisis. The dollar gained a cent on the euro as US ISM non-manufacturing PMI rose from 56.2 to 56.7 and analysts remained ‘cautiously optimistic’.
- Focus today will be on the US trade balance and unemployment claims data this afternoon. Despite the data predicted to be mixed, the dollar is likely to continue gaining on the euro as Syriza leader, Tsipras, continues giving conferences around the world.
GBP/AUD: Currently trading at 1.9526
- Yesterday saw UK PMI services data register a strong increase and push this rate in favour of the pound before meeting resistance around 1.966. Improved Australian retail sales data provided little support for the Aussie as poor housing and business confidence results both fell significantly.
- Following the rate cut on Tuesday, traders will be scrutinising the RBA monetary policy statement early tomorrow morning for any comments relating to the longevity of the recent decision. As per usual, hawkish sentiment could lead to heightened volatility and Aussie strength.
GBP/NZD: Currently trading at 2.0614
- Volatile trading was seen yesterday as the Kiwi gained on the pound until resistance was met around 2.036 and Sterling pushed the rate back toward the 2.065 resistance level. Now trading with sideways movement, this pair has resisted influence from US data as the pound continued to strengthen yesterday evening.
- New Zealand banks will be closed today in observance of Waitangi Day and our focus will therefore be on UK and US figures. With UK data likely to be glazed over and US data forecast to deliver mixed results, level trading could continue throughout the day.
GBP/CAD: Currently trading at 1.9097
- Yesterday saw a strong session for the pound after UK Services grew and the Canadian Ivey PMI was far off prediction, expanding at the slowest pace in almost four years. Sterling was able to reverse gains made by the Loonie earlier this week after Crude fell almost 10% on the back of US oil inventories data.
- Looking ahead to this afternoon, we have the official bank rate from the UK, which we expect will remain unchanged, followed shortly by the Canadian Trade Balance figures, which economists predict will show a slowdown in demand for exports. We therefore expect risks to the Loonie downside.
This blog is prepared by Caxton FX Ltd for information purposes only and may contain personal views that are not the opinion of the company. This is not an offer to purchase or sell any security or an investment advertisement. Caxton FX Ltd is authorised and regulated by the Financial Conduct Authority, although foreign exchange transactions with Caxton FX are regulated by HM Revenue and Customs. This email does not constitute advice for any foreign exchange transaction, nor is it intended as a solicitation for funds or recommendation to trade.
