11 Mar 2015

EUR/USD continues its march towards parity

United States Dollar: The US dollar has continued to march higher, with those strong jobs numbers on Friday still fresh in the minds of many investors and traders. EUR/USD has been dumped again too, which has in turn dragged on GBP/USD. As well as this, UK Manufacturing and Industrial Production data all printed weaker than expected on Wednesday morning. The figures showed that output fell 0.5% in January, driven in large part by a decline in electronics production. All of this conspired to see GBP/USD fall below 1.50 and by the late afternoon session the pair fell to a low of 1.4897. It has recovered a bit in Asia as we see investors take some profit on short EUR/USD positions, but not by much and cable opens this morning at 1.4975. The dollar doesn’t look like given up much of its gains before the week is out, this unless US retail sales data – released today – really disappoints.

We expect a range today in the GBP/USD rate of 1.4910 to 1.5045

Euro: EUR/USD slumped to a low of 1.0495 overnight. It’s struggling for many of the same reasons outlined in the most recent daily commentaries. Bond yields in the Eurozone fell to record lows yesterday after the ECB recently initiated purchases of sovereign debt and it has lumped further downward pressure on the single currency. The relentless euro selling hasn’t just played out against the US dollar – GBP/EUR pushed up through 1.4250 yesterday. It’s come back off a little this morning as there’s been a bit of profit taking on those short EUR books but it wouldn’t be a surprise to see this level tested again, perhaps even before the week is out.

We expect a range today in the GBP/EUR rate of 1.4080 to 1.4180

Aussie and Kiwi Dollars: As the RBNZ rate announcement drew closer yesterday, there were a few nervous traders that half expected the central bank to announce a cut in rates. NZD/USD fell to .7187 in the lead up, but then, as the RBNZ announced that it would be leaving interest rates on hold, it snapped higher. It continued to push higher throughout the day in New Zealand as Governor Wheeler took somewhat of a neutral stance. He also said that he was pleased with the current level of NZD/USD which ironically gave the kiwi a bit of a boost – it opens this morning at .7390 after trading to a high of .7406 early this morning. Meanwhile, Aussie employment data printed stronger than market forecasts overnight and gave a leg up to the Australian dollar. The unemployment rate came in under 6% again and the number of people employed advanced by 15,600 vs. expectations for 15,300 in February. Both GBP/AUD and GBP/NZD are therefore a bit lower this morning and trade at 1.9550 and 2.0280 respectively.

We expect a range today in the GBP/AUD rate of 1.9450 to 1.9620

We expect a range today in the GBP/NZD rate of 2.0200 to 2.0360

Data Releases

AUD: No data

EUR: German Buba President Weidmann Speaks, Industrial Production m/m

GBP: BOE Gov Carney Speaks

NZD: Business NZ Manufacturing Index

USD: Retail Sales m/m, Unemployment Claims, Business Inventories m/m

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