United States Dollar: GBP/USD bounced around on Friday morning, rising to 1.5448 in advance of the release of US data on Friday afternoon. Prelim GDP printed stronger than market expectations at 2.2% q/q vs. 2.0%, but it was actually weaker than the first estimates of 2.6% made last month, marking a significant slowdown from the third quarter. That said the dollar held firm. It also remained strong in the wake of a hugely weaker than expected Chicago PMI reading which came in at 45.8 vs. 58.4 that day. February’s business barometer index was shown to have fallen to its lowest level since July 2009 and yet the dollar continued to hold firm. GBP/USD pushed to a high of 1.5457 on the news but it has fallen back since to open this morning at 1.5395. The focus for the early part of this week will be on UK PMIs. The data, particularly Services PMI, will need to be strong for GBP/USD to hold on to the 1.54 level. If the number comes in weaker than forecasts, GBP/USD could well start to shift lower. US Non-Farm Payrolls are due on Friday – employment numbers have been very strong of late and a print of +200k might see GBP/USD give up a lot of its gains from last week and make that move back towards the big 1.50 figure.
We expect a range today in the GBP/USD rate of 1.5310 to 1.5460
Euro: EUR/USD has fallen further since Friday morning and trades at 1.1190 currently. There remain big doubts around some assurances and bailout reform promises made by the Greek government and markets have turned ever more bearish on the single currency. Greece has also been warned to start reforms as soon as possible. The Dutch finance minister Jeroen Dijsselbloem told the FT over the weekend and in reference to the Greek reforms that “there are elements that you can start doing today. If you do that, then somewhere in March, maybe there can be a first disbursement. But that would require progress and not just intentions.” Naturally, a lot of the headlines will be dominated by Greece this week and these headlines will most probably continue to weigh on the single currency. Later in the week, the ECB are set to deliver their monetary policy announcement and although no change in either rates or QE is expected, President Draghi is set to sound dovish in his accompanying press conference (again). However, the fact that markets have a dovish rhetoric priced in already, leaves the door open to a potential bounce should he surprise and sound a little more positive, or should I say, less dovish than usual.
We expect a range today in the GBP/EUR rate of 1.3680 to 1.3780
Aussie and Kiwi Dollars: In somewhat of a surprise move, The People’s Bank of China cut its lending and deposit rates by 0.25% on Saturday. In other news from China, HSBC Final Manufacturing PMI printed stronger than market expectations at 50.7 vs. 50.1 and yet despite the two events, the aussie dollar drifted lower overnight. It slipped below 78 US cents this morning as speculation for a RBA rate cut early this week intensifies. The rate announcement is due later tonight. NZD/USD has fallen with the aussie and it trades at .7525 currently.
We expect a range today in the GBP/AUD rate of 1.9700 to 1.9880
We expect a range today in the GBP/NZD rate of 2.0380 to 2.0520
AUD: Building Approvals m/m, Current Account, RBA Rate Statement
EUR: CPI Flash Estimate y/y, Unemployment Rate
GBP: Manufacturing PMI, Net Lending to Individuals m/m, M4 Money Supply m/m, Mortgage Approvals
NZD: ANZ Commodity Prices m/m
USD: Core PCE Price Index m/m, Personal Spending m/m, Personal Income m/m, Final Manufacturing PMI, ISM Manufacturing PMI, Construction Spending m/m, ISM Manufacturing Prices
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