Nicholas Ebisch, FX Analyst
A day of light trading yesterday precedes a busy week of data which starts this morning. Today we will see the CPI y/y from the UK, and core retail sales m/m, PPI m/m, and retail sales m/m from the US. With cable recovering ever so slightly from its fall yesterday, today should prove yet another pivotal day. The euro weakened yesterday for no apparent reason other than it has been relatively strong in the last few weeks. Concerns remain in the Eurozone, as more of Greece’s payments loom on the horizon. Additionally, Draghi is expected to use dovish language in his ECB statement and press conference tomorrow, as the Eurozone’s QE programme is barely a month and a half old and needs more time to have an effect.
GBP/EUR: Currently trading at 1.3887
Sterling gained around 0.65% on the single currency yesterday. With no data of real importance released yesterday, this move was more a continuation of Sterling gains from the back end of last week.
Attention today will be on the release of UK CPI (09:30). With inflation expected to remain around zero, some Sterling weakness may be expected on the back of this data. With very little data coming out of the Eurozone today, UK inflation data will set the tone for trading of this pairing today.
GBP/USD: Currently trading at 1.4643
Look out for volatility this week. This pairing broke through a record low level yesterday of 1.457 and has rebounded to the mid 1.46 trading range. The pound is stable at the moment, and is awaiting two key data points this week to determine its strength going forward. Today’s CPI y/y data from the UK will be a big data release showing fundamental inflation levels in the UK. Additionally, US retail sales and PPI will give us a better idea of the dollar’s intrinsic strength.
EUR/USD: Currently trading at 1.0556
This morning’s early trading sessions has seen further weakness for the euro despite a positive German wholesale price index, as the single currency looks to plunge further towards the 1.05 mark. There are no more announcements out of the Euro-zone today, so market activity is expected to be influenced by an important day in the US.
Later at lunchtime sees both PPI and retail sales figures out of the US, and with both forecast to improve to 0.3% and 0.7% respectively, we expect to see the greenback strengthen against the euro in the afternoon.
GBP/AUD: Currently trading at 1.9330
Following the initial 2 cent sterling gain yesterday morning, the rate continued to steadily climb reaching a high for the day of 1.936. Today could provide some volatility with both UK CPI and US retails sales scheduled for release. With UK inflation expected to remain at 0%, anything other than that could cause sharp market movement. If US retail sales increase as forecasted, we could see the Aussie recoup some of these recent losses. Investors will also be looking towards the CNY GDP announcement tomorrow morning following the unexpected trade balance figure yesterday creating significant market movement.
GBP/NZD: Currently trading at 1.9640
The pound has so far managed to hold onto most of its gains versus the kiwi dollar after yesterday’s disappointing Trade Balance data from China.
The pound will remain under pressure today after the UK inflation report, and we will most likely see some consolidation in the price today before a further batch of Chinese data which is released tomorrow during the Asian session. The kiwi dollar was shown to be vulnerable to Chinese data so tomorrows GDP q/y and Industrial Production data from the world’s second largest economy will be eyed closely by traders.
GBP/CAD: Currently trading at 1.8440
With a day of minimal activity yesterday, sterling managed to creep higher closing at the 1.8475 mark.
Today we have UK CPI data in the am session, where forecasters are predicting it will remain around zero. If it falls negative we expect there will be a downside risk, this could well be the tone for the day if US retail figures improve as predicted.
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