Nicholas Ebisch, FX Analyst
It will still take some time before there is a complete turnaround and strong growth in the Eurozone, but Mario Draghi commented that stimulus efforts are delivering signs of progress in Europe. However, he also went on to stress that the region’s full recovery depends on completion of the stimulus programme through to September 2016 coupled with sustained low interest rates. This morning saw Australian dollar strength from a fall in the Australian unemployment rate and positive employment change figures. Today, US data regarding building permits, unemployment claims, and the Philly Fed Manufacturing Index will be released in the afternoon.
GBP/EUR: Currently trading at 1.3944
Yesterday saw Sterling reach the 1.3950 mark. This was on the back of comments from Mario Draghi, at the ECB press conference, that the ECB intended to complete its bond buying programme until September 2016, indicating the earliest time there could be a rate rise is the back end of next year. This is despite the recent pickup in economic activity in the Eurozone.
This morning has seen a further downgrade of Greece’s credit rating, which could lead to increased uncertainty over Greece’s ability to meet its debt obligations. With no data of significance being released for this pairing today, Euro weakness could be seen with an increased threat of Greek default.
GBP/USD: Currently trading at 1.4824
Yesterday proved to be a strong day for the pound as US data disappointed. The Empire State Manufacturing Index was -1.2, forecasted at 7.2 and negative for the first time since December. Capacity utilization rate came in at 78.4%, slightly lower than the forecasted 78.7%, and industrial production was also weaker than expected at -0.6%. The dollar weakened against the pound yesterday afternoon, and while last night saw sterling jump half a cent around midnight following FOMC member Lacker’s comments and the Improved RICS UK House Price Balance.
US data to be released this afternoon include building permits, forecasted to decrease slightly from last month to 1.08M; unemployment claims, expected to rise 3K to 248K; and the Philly Fed Manufacturing Index, forecasted to increase slightly to 6.5 from 5.0. With mixed results forecast, we expect to see some volatility today.
EUR/USD: Currently trading at 1.0642
Yesterday afternoon saw a string of poor US data which weakened the greenback against the euro, as both the Empire State manufacturing index and the m/m industrial production figure disappointed. The euro therefore managed to climb its way back above the 1.06 mark, with further dollar weakness seen late last night as TIC long term purchases also fell below expectations.
Another data-packed day from the US awaits us today, as building permit figures, weekly unemployment claims and the Philly Fed manufacturing index are all released. With all data forecast to produce mixed results, we therefore expect to see another volatile day of trading for the pairing.
GBP/AUD: Currently trading at 1.9111
The recent sterling gains were washed away yesterday evening with the rate descending into a downward spiral, falling by almost 3 cent. The overnight AUD employment rate unexpectedly fell to 6.1% from 6.2% with the number of people in work increasing by 37.7K last month.
With no data today from either side of the pairing, investors will be keeping an eye on USD building permits along with unemployment figures both forecast to cool off slightly. As the downward trend appears to have met resistance this morning, we expect the rate to remain around the 1.91 mark today.
GBP/NZD: Currently trading at 1.9508
Sterling data is still thin on the ground so the market will have to decide the direction for this pairing from events elsewhere. The Business NZ Manufacturing Index which was released last night showed that the manufacturing sector in New Zealand was growing steadily whilst Australian employment data impressed so the kiwi dollar managed to make some gains during Asian trading.
There is a lack of any serious scheduled economic announcements that are likely to affect this pairing today so we should continue to see further sideways trading before tomorrow’s employment data from the UK.
GBP/CAD: Currently trading at 1.8262
The Bank of Canada held the overnight rate at 0.75 per cent yesterday for a second straight meeting. This along with the banks rosy economic projection caused the loonie to jump almost three cent against the pound, even after Canada’s manufacturing sales data fell shy of forecast.
With no pairing specific data out today, the market will continue to digest yesterday news ahead of tomorrow’s busy calendar. The feeling is more downside risk for the day ahead.
This blog is prepared by Caxton FX Ltd for information purposes only and may contain personal views that are not the opinion of the company. This is not an offer to purchase or sell any security or an investment advertisement. Caxton FX Ltd is authorised and regulated by the Financial Conduct Authority, although foreign exchange transactions with Caxton FX are regulated by HM Revenue and Customs. This email does not constitute advice for any foreign exchange transaction, nor is it intended as a solicitation for funds or recommendation to trade.
Subscribe to our morning, weekly or monthly reports here and make sure you never miss an update: https://www.caxtonfx.com/currency-banking/the-caxton-account#Free-currency-reports
