21 Dec 2014

Dollar strengthens as market conditions start to thin out

United States Dollar: GBP started the day on Friday on a positive note, responding well to better than expected UK public sector borrowing data and CBI Realised Sales. The dollar then started to strengthen throughout much of the rest of the session, this despite a lack of any top tier US economic data. There were some additional comments made by various Fed officials following the FOMC statement earlier in the week though which helped. San Fran Federal Reserve Bank President John Williams said before a group of reporters on Friday that “I would say at this point that June 2015 seems like a reasonable starting point for thinking about when lift-off could happen” when referring to interest rates. Meanwhile Federal Reserve Bank of Richmond President Jeffrey Lacker supported the FOMCs most recent change in language and went on to say “I think it is highly likely rates will go up next year, not a certainty but a likelihood”. GBP/USD fell to a low of 1.5606 on Friday. It’s been quiet since Asia opened for the week and opens this morning at 1.5640.

We expect a range today in the GBP/USD rate of 1.5590 to 1.5690

Euro: EUR/USD attempted a break through 1.23 on Friday but failed. After touching on the big figure, it then proceeded to drop throughout the afternoon session, bottoming out at 1.2215 as New York came to a close. It came largely as a result of the strength seen in the dollar but it’s recovered a little overnight to open this morning at 1.2250. There isn’t any economic data due today to get too excited about but as markets start thinning out for the public holidays later in the week, we might start seeing some volatility in the majors. Meanwhile, the euro has continued to lose ground vs. the pound and GBP/EUR opens this morning at 1.2755.

We expect a range today in the GBP/EUR rate of 1.2700 to 1.2800

Aussie and Kiwi Dollars: As the greenback strengthened across the board on Friday AUD/USD fell to a low of .8120 and NZD/USD dropped to .7711. As well as this, commodity prices have failed to make any kind of sustained recovery which is putting further pressure on the likes of the AUD and NZD. As mentioned above, market conditions will start to thin out from today and this can make for choppy and volatile trading – these two currencies, given their link to commodities, could be affected quite a lot.

We expect a range today in the GBP/AUD rate of 1.9100 to 1.9280

We expect a range today in the GBP/NZD rate of 2.0060 to 2.0250

Data Releases

AUD: No data

EUR: Consumer Confidence

GBP: No data

NZD: Trade Balance

USD: Existing Home Sales

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