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14 Dec 2014
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Oil and US stocks lower again, but GBP/USD remains steady

United States Dollar: UK construction data printed weaker than expectations on Friday. It showed that output in the sector decreased by 2.2% in September vs. forecasts for 0.8% in October. GBP/USD bumped along close to the 1.57 figure following the release. It spiked to a 1.5742 in the afternoon after US producer price data disappointed, the index falling 0.2% in November. It was a bumpy ride from then on as the pair traded within a 40-50 point range. Meanwhile, Fitch (a rating’s agency) re-affirmed the UK’s ratings, which was a mild positive. In other news, oil continued to fall which in turn has undermined equity prices – the S&P dropped 3.5% last week and the Dow fell 3.8%, its biggest weekly drop in three years. The focus this week will be on UK and US inflation data. Average earnings and employment data is then due on Wednesday. The big event comes on Wednesday though when the Fed make their monetary policy statement. The debate so far has been centred on whether the FOMC will remove the phrase “considerable time” from its official statement, in reference to when the next rate hike will be. GBP/USD opens this morning at 1.5725.

We expect a range today in the GBP/USD rate of 1.5680 to 1.5780

Euro: EUR/USD pushed from 1.2425 to a high of 1.2485 on Friday as the dollar weakened across the board, stocks slumped and oil continued to weaken. There were also some encouraging signs regarding the ECB’s LTROs, as the central bank said that some EU banks will be paying these back during the next few days. EUR/USD has drifted lower since Friday afternoon however and opens this morning at 1.2435. Fitch has downgraded France to AA outlook stable which is adding to downward pressure on the single currency. Meanwhile, the president of the Bundesbank, Jens Weidmann, told a French newspaper over the weekend that he was unhappy that the EU was giving France more time to announce plans to reduce its budget deficit. This is also an obvious negative for the euro and the pair opens today at 1.2445.

We expect a range today in the GBP/EUR rate of 1.2600 to 1.2680

Aussie and Kiwi Dollars: Commodity currencies have continued to suffer as raw material and oil prices feel the pressure. AUD/USD fell to a low of .8205 early this morning and NZD/USD dipped to a low of .7733 overnight. The hostage incident in Sydney is also unfolding at the moment and it’s garnering a lot of attention. Later this evening the RBA monetary policy meeting minutes are released, although we aren’t expecting too many surprises. HSBC Flash Manufacturing PMI from China is also worth looking out for. GBP/AUD and GBP/NZD trade at 1.9055 and 2.0275 respectively.

We expect a range today in the GBP/AUD rate of 1.8910 to 1.9090

We expect a range today in the GBP/NZD rate of 2.0170 to 2.0300

Data Releases

AUD: Monetary Policy Meeting Minutes

EUR: German Buba Monthly Report

GBP: CBI Industrial Order Expectations

NZD: No data

USD: Empire State Manufacturing Index, Capacity Utilization Rate, Industrial Production m/m, NAHB Housing Market Index, TIC Long-Term Purchases

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