Raphael Sonabend, FX Analyst
Whilst monthly UK manufacturing production fell to 0.1% from 0.8%, annual figures remained strong and saw a 2.4% increase. With a recent slip in oil prices, which limited the production of oil-manufacturing machinery, this figure represents the downside risks of falling oil prices but also the current strength of the UK sectors, as reflected in three strong PMI figures last week. Trading today will focus on peace talks taking place in Belarus before turning to Brussels for the Eurogroup meetings. Heavy volatility and lower global risk appetite can be expected throughout today with the potential to extend through the week if anything unexpected is announced.
GBP/EUR: Currently trading at 1.3481
- Sterling strength was seen throughout yesterday morning as monthly manufacturing production fell from 0.8% to 0.1%. A poor figure on the surface was not as bad as appearances as manufacturing production rose by 2.4% compared to the year before.
- Volatile trading is likely to be seen today as the Eurogroup meetings will take place throughout the day. Whilst the meetings are closed to the press, Finance Ministers could give comments to reporters and therefore strong movements may be seen in euro pairings as analysts scrutinise their every word.
GBP/USD: Currently trading at 1.5265
- The pound gained on the dollar throughout the day, pausing briefly in the morning when manufacturing production registered a monthly decline. Sterling has broken free of the dollar shackles this morning and is currently attempting a rally towards 1.53; perhaps a sign of confidence in the UK economy in anticipation of the Eurogroup meetings today.
- US Crude inventories data is likely to be overshadowed by the Eurogroup meetings today; Cable will likely feel the wake of euro volatility throughout today’s session.
EUR/USD: Currently trading at 1.1318
- The dollar slowly gained on the euro yesterday, with a particularly strong downward spike seen around midday, which was likely due to markets being influenced by Greece headlines. Last night saw the Greek government winning the confidence vote by 162-137 and the euro strengthened slightly as a result.
- A big day today as two meetings will govern trading throughout. In Belarus; German, French, Ukrainian and Russian leaders are meeting to discuss a peace agreement and failure to do so could lead to further EU sanctions. In the evening, euro-area Finance Ministers will try to discuss a new deal for Greece and how to resolve the debt crisis. Volatility can be expected throughout the day.
GBP/AUD: Currently trading at 1.9665
- On the back of the fairly strong UK manufacturing production y/y and GDP data yesterday, we witnessed further Sterling gains throughout the afternoon. The overnight Australian data proved to be very strong, with consumer confidence up 8% from a previous reading of 2.4%, home loans rose to 2.7% from -0.4% and investment lending data up to 6% from -2.2%. In light of the recent pessimistic RBA comments, this was not enough to halt the sterling charge and the rate continued to climb this morning above 1.969.
- We could see some added volatility today with the Eurogroup meetings likely to send waves across the FX markets.
GBP/NZD: Currently trading at 2.0587
- The pound gained on the Kiwi throughout the majority of yesterday, reaching highs of 2.0635, before the NZD recovered most of its lost ground before the end of the day. Sterling’s strength this morning was seen as well in this pairing and the pound has gained a cent so far in this session.
- With the Eurogroup meetings today, global risk appetite is likely to be subdued and we could therefore see Sterling strength continue throughout the day.
GBP/CAD: Currently trading at 1.9222
- Sterling gains seen yesterday as annual UK manufacturing production figures registered a strong growth, Crude slipped from 58.4 to 56.2 and Bank of Canada’s Senior Deputy Governor Wilkins said that the economy is still below potential. Further advances have been made in this morning’s session as the pound continues on its warpath.
- Following the trend of other commodity-currencies, the Loonie is likely to weaken today against the pound as traders choose to invest in ‘safer’ currencies such as the pound during today’s meetings.
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