Nicholas Ebisch, FX Analyst
Equity investors in the US have long feared the inevitable first interest rate rise, and have been cautious with investment over the last few months as a June rate rise was appearing more and more likely. Now that poor U.S. data has pushed expectations of an interest rate rise back from June, further into 2015, the dollar has weakened and equities have surged in the US, Asia, and Europe this morning. US equity indexes had a very good day, with the NASDAQ hitting another historical record high, and the Dow Jones Industrial Index gaining over 100 points during the session. Today, we look to the Eurogroup meetings for any information regarding the impending Greek debt crisis, and US core durable goods orders later in the day.
GBP/EUR: Currently trading at 1.3909
Yesterday saw the euro strengthening against the pound despite weak data from both parties, with German and French Manufacturing and Services PMI data and UK retail sails all failing to meet forecasts. The results of the German Ifo Business Climate survey came in slightly higher than forecast this morning, with some fluctuations in the rate as markets digest this and yesterday’s data.
With no additional eurozone or UK data on the agenda, the main movers for this pairing will be the outcome of the day’s Eurogroup meetings, though a deal with Greece remains unlikely. We can expect some volatility from the euro as a result.
GBP/USD: Currently trading at 1.5130
Disappointing retail sales saw sterling dip in the morning, though it quickly rebounded. After worse-than-expected US data, including unemployment claims, manufacturing PMI, and new home sales, the pound continued to gain against a weakened dollar, climbing back above the 1.50 mark. The rate broke 1.51 this morning in light of the weak data and their potential effect on a future rate increase.
As there is no UK data to be released today, attention will be on the release of US m/m Core Durable Goods Orders (13:30), forecast to be up 0.2%. Given that recent US data has been disappointing, a positive result may see the greenback strengthen.
EUR/USD: Currently trading at 1.0878
The euro managed to gain against the greenback yesterday afternoon following a string of poor US data, including weekly unemployment claims, manufacturing PMI and new home sales figures, all disappointing. This morning’s early trading session has continued to see euro gains as the market digests yesterday’s news, coupled with a better than expected German Ifo Business climate index, which has pushed the pairing towards the 1.09 mark.
No Greek resolution is expected to be announced from today’s Eurogroup meetings, so we could continue to see euro gains for the rest of the morning. Later on at lunchtime sees US core durable goods order figures forecast to improve by 0.2%, so we could see the greenback regain some of its lost ground.
GBP/AUD: Currently trading at 1.9397
Following the unexpected decline of UK retail sales yesterday morning followed by the announcement that US New home sales dropped 11.4% to a 4-month low, we saw the rate trade range-bound between 1.931- 1.945 as investors digested this information.
With no data scheduled for release today, investors will be looking towards RBA Gov Stevens comments late on Monday. We expect next week to provide some volatility as speculation surrounding the general election ramps up.
GBP/NZD: Currently trading at 2.000
Yesterday remained fairly quiet as we saw range-bound activity with little gains made in either direction. The pound has been able to capitalise on a faltering Kiwi this morning as the effects from weak US new homes data yesterday ripple through the market.
With a quiet calendar today, investors will look towards the release of New Zealand’s trade balance next Tuesday and the UK’s upcoming election in two weeks’ time.
GBP/CAD: Currently trading at 1.8337
A disappointing Retail Sales release from the UK set the tone for the day, weakening the pound right up to closing. Sales declined by 0.5 per cent in March.
The pound has started a recovery mission this morning, clawing back most of the losses from yesterday’s session. The focus for today will be on Governor Poloz, who will be speaking at 15:30pm. This form of data usually brings with it volatility. A downside risk is expected in the afternoon session.
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