Nicholas Ebisch, FX Analyst
The dollar posted broad losses over the weekend, driven by negative sentiment about US economic performance over the last few weeks. Poor data on Friday, in the form of core durable goods orders m/m, did not bode well for the greenback, which was already on the back foot. Cable rose significantly on the negative dollar sentiment, and further volatility can be expected, as we look forward to the Federal Reserve meeting this week on Wednesday. There is little on the calendar today, apart from RBA governor Stevens speaking at a conference later tonight. This could be a high-impact conference, as the Australian central bank is largely expected to cut interest rates at their next meeting in May.
GBP/EUR: Currently trading at 1.3968
On Friday, the focus was on Eurogroup meetings in Riga, with no new UK data released. No Greece deal was reached, as expected, and while the official line remains that Greece will not default and that the eurozone is indivisible, some finance ministers expressed frustration with Greece's reluctance to commit to reforms, including capital controls, and called for a Plan B in case of a Greek default.
Today's main data release is the results of the UK's CBI Industrial Order Expectations, forecast to show an increase in the number of orders received. Negotiations will continue between Greece and its creditors as Greece looks for a way to pay this week's salaries and pensions in addition to upcoming repayments to the IMF. We can expect continued volatility from the euro, with the possibility of some strengthening from the pound if today’s data results are positive.
GBP/USD: Currently trading at 1.5179
US Core Durable Goods data came in weaker than forecast, at -0.2%, on Friday, combining with earlier weak data and indications from last Wednesday’s MPC Votes that UK rates might rise sooner than expected to contribute to the pound’s strengthening against the greenback. Friday saw the rate reaching 1.51 for the first time since early March.
The main data release for this pairing will be the result of CBI Industrial Orders Expectations (11:00amBST), forecast to increase. Investors will be looking ahead to the FOMC’s statement on Wednesday to determine the effect of further weak data on the target date for a rate increase. In light of this, we may see the greenback continue to weaken against sterling.
EUR/USD: Currently trading at 1.0864
Last week’s data results were disappointing from both the eurozone and the US, with Friday's core durable goods the latest in a string of weak US data. No deal was reached to secure further aid for Greece during meetings of eurozone finance ministers in Riga Friday, so negotiations will continue this week.
With no major data expected, we may see this pairing remain range-bound. Fluctuations in the rate will come from any news about Greece’s negotiations with its creditors and ongoing questions about the date of a US rate increase in light of recent weak US data and Wednesday’s FOMC statement.
GBP/AUD: Currently trading at 1.9380
Last week saw the pound gradually regain its recent losses with the rate climbing back up to nearer the 1.94 mark on Friday.
A positive result from this morning’s UK Industrial Order Expectations may see sterling strengthen. With RBA Gov Glenn Stevens speaking later tonight, we are likely to see some volatility as he is expected to comment on last week’s AUD CPI data. Tomorrow the UK will announce Preliminary GDP data, which could have an immediate effect on the market following an unexpected result, especially as investors will be scrutinizing data in light of the nearing election.
GBP/NZD: Currently trading at 1.9931
The kiwi hit 2.00 last Friday as the markets continued to adjust to disappointing data from both the US and New Zealand. New Zealand last week saw m/m visitor arrivals decreasing 3.6% and y/y credit card spending increasing by 5.2%, slightly less than the previous month’s y/y increase of 5.8%.
This morning’s UK CBI Industrial Order Expectations results may leave room for the pound to gain further ground against the kiwi. Looking ahead, no new data is expected from New Zealand today, so the focus will be on tomorrow night’s (11:45BST) trade balance announcement, forecast to increase to 312M from last month’s 50M. Data indicating strong New Zealand exports may see the kiwi strengthen.
GBP/CAD: Currently trading at 1.8454
On Friday the pound unexpectedly gained more than a cent leading up to the day’s sole data release. Governor Poloz spoke in the afternoon, with a view that the damage from a drop in oil prices will disappear in the second half of the year.
With a quiet calendar to start the week, investors will already be looking ahead to tomorrow with UK GDP Preliminary data in the early session, followed by a speech from Governor Poloz in the afternoon. With this in mind, we don’t expect to see much change today.
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