23 Feb 2015

Markets Await Inflation Report Hearings and Yellen Testimony

United States Dollar: This morning sees Bank of England Governor, Mark Carney and other MPC members discuss the latest Inflation Report before the Treasury Select Committee at Parliament. The latest report was a little more hawkish than the markets were expecting and saw the forecasted date of the first UK rate hike brought forward to summer 2016. Holders of the pound will be hoping for more upbeat comments from Carney and co on the state of the UK economy which may push the pound higher. This afternoon sees Fed Chair, Janet Yellen’s first day testifying before the Senate Banking Committee and should the recent dovish comments and expectations of a 2015 rate hike continue to be downplayed we may see cable push higher throughout the day and into tomorrow when her testimony concludes. GBP/USD currently sits at 1.5450 after gaining more than a cent yesterday despite a poor CBI Realised Sales release from the UK. The one release of note from the States yesterday was an under-par Existing Home Sales release which saw an annualised 4.82M homes sold in January.

We expect a range today in the GBP/USD rate of 1.5340 to 1.56

Euro: Yesterday saw the latest German IFO Business Climate survey climb to 106.8 from last month’s 106.7 however the rise wasn’t as sharp as markets were expecting. The soft data saw GBP/EUR push above 1.36 where it has remained to currently trade at 1.3640. EUR/USD has managed to stay above 1.13 over the past 24 hours despite the IFO release which may signal the markets are expecting a dovish bias from Yellen in Washington over the next 48 hours. We have Final CPI from the Eurozone at 10am, Eurogroup Meetings and Mario Draghi speaking at 2pm at the unveiling of the new 20 Euro note. It promises to be a busy day.

We expect a range today in the GBP/EUR rate of 1.3490 to 1.37

Aussie and Kiwi Dollars: Overnight has seen both the Aussie and Kiwi drop on the back of falling inflation expectations from New Zealand. The latest survey from the RBNZ sees New Zealand business managers expecting 1.8% price growth over the next two years, down from an expected 2.1% in the previous survey. NZD/USD has dropped from .7530 to currently trade at .7440. AUD/USD mirrored the fall dropping to .7755 from .78 at the time of the release. GBP/NZD has shot up to 2.0745 with GBP/AUD looking for another attempt at 2, it sits at 1.9915.

We expect a range today in the GBP/AUD rate of 1.9850 to 2.0080

We expect a range today in the GBP/NZD rate of 2.0620 to 2.0850

Data Releases

AUD: Construction Work Done q/q; Wage Price Index q/q

EUR: Eurogroup Meetings; ECB President Draghi Speaks

GBP: Inflation Report Hearings

NZD: RBNZ Governor Wheeler Speaks

USD: Fed Chair Janet Yellen Testifies

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