Raphael Sonabend, FX Analyst
Yesterday saw Sterling strengthen against all counterparts as the Bank of England held the official bank rate at 0.50%. As geopolitical tensions continued to rise around the world, the pound saw strength as UK data has been placed on the back burner during a time of relative calm for the UK. This trend is likely to continue for the next couple of months with the pound seeing strength as tension and disharmony continues to grow in the Eurozone and throughout the world. Focus today will be on Canadian and US employment data at 13:30. Whilst Canadian employment change is forecast to rise from -4.3K to 4.7K, US non-farm employment change is predicted to fall from 252K to 236K. We could see another day of Sterling gains if the dollar weakens on the back of falling non-farms data.
GBP/EUR: Currently trading at 1.3370
- The euro saw strength yesterday morning following a positive outlook from the EU economic forecasts. For the first time in eight years, every member state in the EU is expected to see economic growth. Forecasts have been revised up across the board with growth predicted to reach 1.3% in the euro-area at the end of this year and 1.9% in 2016. Sterling resisted euro gains around 1.331 and pushed the rate back up in the pound’s favour, this pairing then traded on an upward trend for the remainder of the day.
- The only data of note out this morning is the UK trade balance figures this morning. Forecast to drop off slightly from -8.8B to -9.0B, this is unlikely to affect this pairing too much in either direction. With no more data due out for the rest of the day, Sterling gains are likely to continue against the euro.
GBP/USD: Currently trading at 1.5310
- A stellar Sterling performance seen yesterday as the pound climbed almost two cent on the greenback yesterday, breaking the 1.53 mark before trading with sideways movement around 1.533. Yesterday’s Sterling strength reinforced previous trends that the pound fares particularly well when data is scarce and with a quiet February due, we could see a strong month for Sterling.
- Whilst data will be limited today, it will include the all-important non-farms data out of the US in the afternoon and we anticipate volatility will be seen immediately after the release. With non-farm employment change forecast to decrease slightly and the unemployment rate predicted to stay the same, USD weakness may be seen.
EUR/USD: Currently trading at 1.1453
- Euro weakness began trading yesterday as speculation arose concerning the Swiss National Bank buying EUR/USD. EUR/CHF saw a two cent downward spike on the back of this rumour, whether it will be fulfilled or not will remain to be seen but it would be highly unlikely as Swiss reserves already contain a large amount of euros.
- Trading today will be on the back of US employment data this afternoon and with non-farm figures predicted to drop off slightly, we could see another EUR/USD rally towards 1.15.
GBP/AUD: Currently trading at 1.9543
- The RBA monetary policy statement brought no surprises as inflation and growth forecasts were revised lower but in line with expectations. Unfortunately the bank failed to give a clear indication of the future plans for the Australian interest rate and the Aussie weakened on the back of this.
- With no more Australian data due out for the rest of the day, this pairing will be US-data dependent. An anti-climactic RBA statement this morning, coupled with predicted declines in US non-farms data, could see Aussie weakness in today’s session.
GBP/NZD: Currently trading at 2.0618
- A two cent rise was seen in this pairing yesterday as the pound strengthened against the majority of counterparts. A lack of data saw Sterling strength before the Kiwi resisted around 2.075 and began posting gains of its own.
- With focus on US data today we could see further NZD weakness as employment data is predicted to decline slightly.
GBP/CAD: Currently trading at 1.9071
- Relatively level trading was seen yesterday around 1.908 as oil saw a negative spike towards $53 before recovering back toward $58. Canadian trade balance figures fell from -0.3B to -0.6B but this remained above the forecast -1.2B. Mixed data ensured sideways trading throughout the day.
- Focus today will be on Canadian employment and building data this afternoon. Building permits are forecast to rise from -13.8% to 4.8%, a strong result that could bring Loonie strength. Mixed data is expected from employment with the unemployment rate predicted to rise to 6.7% from 6.6% and employment change forecast to improve by 9K. After an early-morning spike in crude today, optimistic traders may choose focus on the more-positive side of this release and the Loonie could see strength against the pound.
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