Nicholas Ebisch, FX Analyst
UK data came in on target yesterday, but US retail sales and PPI data both undershot expectations and the dollar fell across the board as a result. US data is playing a particularly crucial role in the dollar’s strength at the moment, as the Fed is basing their decision regarding when to raise interest rates on if the US economy is strong enough to absorb a rate hike, and poor data does not bode well. Today, we will see an ECB minimum bid rate and press conference. The bid rate is not expected to change, but traders will be intently watching Mario Draghi and the ECB’s press conference regarding the state of the Eurozone economy. Later on, we will see the Canadian monetary policy report, alongside their latest interest rate decision.
GBP/EUR: Currently trading at 1.3882
Yesterday saw range bound trading for this pairing, with a low of 1.3829 and a peak of 1.3878 over the day. Although inflation for the UK came in at zero, this was expected, which meant that the impact of this release was minimal.
Today the focus will be on the European Minimum Bid rate (12:45) and the ECB Press Conference (13:30). With the minimum bid rate expected to remain at 0.50%, the ECB press conference is likely to have more impact on this pairing. With a pickup in Industrial production yesterday to 1.1%, this release may be more hawkish than expected which could lead to Euro strength going into the afternoon.
GBP/USD: Currently trading at 1.47347
Yesterday afternoon saw the pound gain against the dollar as UK y/y CPI remained at 0.0% and US m/m core retail sales, PPI, and retail sales saw weaker-than-expected gains.
On the agenda for the US this afternoon is the release of m/m industrial production data, forecasted to drop off by 0.3% which could add to yesterday’s losses. With no big data expected out of the UK until Friday’s unemployment rate release, we expect any movement to be dictated by US announcements, barring any new uncertainty about the upcoming election.
EUR/USD: Currently trading at 1.0579
Disappointing PPI and retail sales figures yesterday, which came out at 0.2% and 0.9% respectively, significantly weakened the greenback against the euro yesterday, with the single currency jumping up by almost a cent and a half and momentarily reaching 1.07. The pairing has since been on a course of correction, in anticipation of a data heavy day.
Lunchtime today sees an ECB press conference, and whilst no major announcements are anticipated, we expect the ECB to sound optimistic on growth. Later on in the afternoon we have lots of data out from the US which are forecast to produce mixed results; the Empire State manufacturing index and the NAHB housing market index are both set to improve whilst industrial production is predicted to drop off, so we anticipate a volatile afternoon of trading for the pairing.
GBP/AUD: Currently trading at 1.9406
Yesterday proved to be a strong day for Sterling as we saw the rate steadily move over a cent in favour of the pound. Weaker than forecast US retail sales and PPI ensured there was little in the way of resistance to the upward trend. In the overnight session, CNY GDP fell to 7%, the weakest pace of expansion since 2009 which saw the rate break the 1.94 barrier.
With no data scheduled for release today from either side of the pairing, the focus today lies with the series of US announcements this afternoon including industrial Production forecasting a decline of 0.3%.
GBP/NZD: Currently trading at 1.9595
Chinese Industrial production data disappointed this morning, but the world’s second largest economy still managed to grow at 7% in the first quarter of the year which was in line with market expectations. This stymied the loss that the kiwi dollar might have experienced given that China is its largest trading partner.
The Global Dairy Trade price index is released this evening and is a leading indicator of New Zealand’s trade balance so this figure will be eyed closely. A disappointing result will see the kiwi dollar sold off. In the meantime expect some sideways trading as sterling data is thin on the ground.
GBP/CAD: Currently trading at 1.8435
After yesterday’s quiet calendar, today brings us a collection of data from Canada, with Manufacturing sales kicking off proceedings at 1:30pm, where analysts are predicting an increase in sales. Shortly after we will have a statement release by the BOC, with a press conference to follow. Investors will be homing in to find out whether Januarys surprise rate cut was the one and only need for intervention, or if more stimulus is needed. With this in mind we may see volatility in the afternoon.
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