Raphael Sonabend, FX Analyst
Fairly range-bound trading was seen across the FX markets yesterday as traders relaxed for the first time since Syriza came into power in Greece. Volatility subdued as Yellen and Draghi spoke about nothing new yesterday and Greece’s Finance Minister Varoufakis admitted that Greece would have trouble paying off all its debt. Commodity currencies seem to be faring particularly well at the moment as the NZD has seen monthly highs against the greenback on the back of strong trade balance data, CAD has strengthened against the pound as Crude broke above $60 and AUD has been experiencing a mini revival. Trading today should see some more action as we have the UK second estimate GDP at 09:30, before looking across the pond at Canadian and US CPI releases at 13:30. Mixed data out of the US could see greenback weakness whilst strong forecasts for Canadian CPI may bring further Loonie strength. UK GDP is likely to already be priced into the markets but volatility is possible if the actual result strays far from predictions.
GBP/EUR: Currently trading at 1.3666
- Sterling continued to climb yesterday as Varoufakis admitted that Greece would find it difficult to pay off its debt to the IMF and ECB over the next few months. Greece will be relying on the ECB; Draghi has said he’s ready to reinstate waiver of Greek bonds once a successful conclusion is foreseeable.
- Focus will be on the UK today with the second estimate of GDP this morning. Forecast to remain at 0.5%, Sterling gains could continue throughout the day, perhaps even an attempt at the 1.37 level.
GBP/USD: Currently trading at 1.5520
- The pound rose almost a cent yesterday as Yellen said inflation would fall before it rises to the 2% target, she foresees this being reached over the next 2-3 years. New home sales data out of the US fell from 482K to 481K, but this was 10K above forecasts. This release was overshadowed by Yellen’s testimony at the same time.
- UK data will take centre stage this morning in the form of GDP figures, attention will then shift across the pond as US CPI is due to be released in the afternoon. After Yellen’s words yesterday, a fall in CPI may already be priced into the markets however the pound could see further strength if US CPI falls below forecasts.
EUR/USD: Currently trading at 1.1353
- The Euro managed to strengthen slightly this morning, following a positive German consumer confidence survey figure. A quiet day awaits us from the Eurozone and with no major announcements expected, we expect the day’s activity to be influenced by data releases from across the Atlantic.
- The highlight of the day will be the US CPI figure announced early this afternoon; with a poor figure forecast we expect to see some dollar weakness although this could be limited as Yellen warned of falling inflation yesterday.
GBP/AUD: Currently trading at 1.9674
- Yesterday proved to be a quiet day for the pairing, which saw the rate remain between 1.96 and 1.97. The overnight Australian capital expenditure recorded a fall of 2.2% on a quarterly basis which saw the pound gain a cent on the rate taking it above the 1.98 mark. This morning has seen the Aussie reverse all loses as the AUD is experiencing a mini revival.
- Traders will be keeping an eye on the UK GDP data release this morning, although expectations ahead of the second estimate suggest no change to the quarterly or yearly figure.
GBP/NZD: Currently trading at 2.0443
- Mixed news out of New Zealand saw slight volatility but ultimately Kiwi strength. NZ trade balance figures registered a strong rise to 56M, well above the forecast -162M and the previous -195M. The Kiwi gained a cent on the back of this release but this was recovered almost immediately by the pound. Fonterra held their current milk price and this is likely to have been the source of Kiwi weakness early this morning.
- UK GDP this morning could help a Sterling recovery, if the figures come in line with or exceed expectations. Early tomorrow morning we have the ANZ business confidence figures out of New Zealand, with no forecasts made, volatility could be seen in anticipation.
GBP/CAD: Currently trading at 1.9264
- The rate continues to trend in favour of the Loonie following on from Tuesday’s remarks by Governor Poloz and an increase in oil prices yesterdays. Momentum stays with the Loonie as we begin this session.
- Today begins with UK GDP second estimate, followed by Canada’s Core CPI in the early afternoon. The Loonie could be handed more support today as inflation is forecast to increase.
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