United States Dollar: The dollar dropped across the board on Monday, erasing the post non-farm payroll gains on Friday. According to a French journalist yesterday, US President Obama said that the strong US dollar was a problem and although this comment was later denied by US officials, the damage had already been done. German bunds and other European government bonds continue to retreat (and yields are increasing) too as European economic data looks a little healthier but it’s come mainly as a result of the improving ECB outlook for inflation. After falling to a low of 1.5225 yesterday morning, cable rallied on the coattails of EUR/USD yesterday afternoon. The upward momentum continued overnight and GBP/USD ended up trading to a high of 1.5374. The pair has slipped back in the early London session however as EUR/GBP demand prevails - it trades this morning at 1.5275.
We expect a range today in the GBP/USD rate of 1.5220 to 1.5355
Euro: The rout in German bunds doesn’t look to be over just yet. Improving European economic data has supported this sell off in German government debt; two examples yesterday were better than expected German Industrial Production and German Trade Balance. The supposed comments by US President Obama also contributed to a decline in the greenback and as all events played out the euro rallied. EUR/USD pushed off of 1.1115 and went on to trade to a high of 1.1338 overnight. Like GBP/USD though, it has slipped back to open this morning at 1.1285. EUR/GBP meanwhile continues to strengthen and the pair trades at .7385 currently. Expect more volatility in the euro over the near term too as the Greek story develops and the bund market trades erratically.
We expect a range today in the GBP/EUR rate of 1.3510 to 1.3610
Aussie and Kiwi Dollars: AUD/USD spiked overnight following the release of stronger than expected NAB Business Confidence. It traded to .7715 but couldn’t quite sustain this move above the .77 big figure and so opens this morning in London at .7650. NZD/USD pushed higher in line with other currencies vs. the dollar yesterday but has slipped back overnight as the RBNZ monetary policy announcement nears. There’s a good chance that the central bank will cut by 25 basis points but it’s a tight one with rising Auckland house prices presenting a dilemma for the bank. The decision is due tomorrow night.
We expect a range today in the GBP/AUD rate of 1.9880 to 2.0090
We expect a range today in the GBP/NZD rate of 2.1450 to 2.1620
AUD: Westpac Consumer Sentiment, RBA Gov Stevens Speaks
EUR: Revised GDP q/q
GBP: Trade Balance
NZD: No data
USD: NFIB Small Business Index, JOLTS Job Openings, Wholesale Inventories m/m
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