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15 Feb 2015

FX markets steady as US traders enjoy long weekend

United States Dollar: The dollar weakened across the board during the afternoon session on Friday and it continued to drop overnight. Data on Friday showed that US consumer sentiment fell in February, dropping to 93.6 vs. expectations for 98.2. There wasn’t much by way of any top tier UK economic data on the day and so the pound advanced vs. the dollar, trading to a high of 1.5438 early this morning. MPC member Ben Broadbent gave a television interview over the weekend and reiterated a few of the points made during Governor Carney’s post Inflation Report press conference on Thursday. He said “the MPC still believes that the next move in interest rates is likely to be up. But you are right we took the opportunity to say the effective lower bound is somewhat lower than we thought it was 3-4 years ago.” The pound has reacted by starting this week on the front foot. It’s a US public holiday today so there might not be a lot of action in FX markets though. There is plenty of data out of the UK this week including CPI, average earnings growth, unemployment, MPC minutes and retail sales. Headlines will likely be dominated by news from Greece however with the markets hoping a compromise can be reached to keep the Greek economy afloat for a few months before a longer term plan can be implemented.

We expect a range today in the GBP/USD rate of 1.5360 to 1.5460

Euro: EUR/USD fell to a low of 1.1380 on Friday despite the release of better than forecast German Prelim GDP which came in at 0.7% for the fourth quarter vs. expectations for 0.3%. European Flash GDP also printed better than expected at 0.3% vs. 0.2% for the fourth quarter. The pair then recovered once New York came online and it has pushed higher overnight to open this morning at 1.1418. Meanwhile, Greece and the EU look set to continue negotiations this week. The euro has pared its losses since Friday morning partly as a result of news that German Chancellor Angela Merkel appears willing to compromise over allowing Greece access to emergency funding. GBP/EUR appears to be steady for now and it trades at 1.3500 currently.

We expect a range today in the GBP/EUR rate of 1.3460 to 1.3535

Aussie and Kiwi Dollars: AUD/USD and NZD/USD have both steadily advanced since Friday and open this morning at .7775 and .7505 respectively. Bids in the kiwi were supported overnight by stronger than expected NZ retail sales data which rose by 1.7% in Q4 vs. expectations for 1.3%. GBP/AUD and GBP/NZD are both steady for the time being and trade at 1.9815 and 2.0530 this morning.

We expect a range today in the GBP/AUD rate of 1.9750 to 1.9940

We expect a range today in the GBP/NZD rate of 2.0480 to 2.0620

Data Releases

AUD: Monetary Policy Meeting Minutes

EUR: Trade Balance, Eurogroup Meetings

GBP: No data

NZD: No data

USD: No data

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