10 Dec 2014

Oil lower, dollar lower as attention turns to ECB”s second TLTRO

United States Dollar: GBP/USD has traded a steady range over the last 24 hours. It dipped to 1.5648 yesterday morning as the dollar was well bid throughout the London session. BoE Governor Carney was interviewed and quoted in the Birmingham Post yesterday too but didn’t say anything that surprised markets. He said “our stimulus is flowing through the economy and that is appropriate because we are going to go through a period now where inflation is low – we think it is probably going to dip below one per cent”. As the day went on the dollar started to weaken. Oil prices fell to a five-year low yesterday whilst US data showed that there was a surprise jump in oil inventories – this in turn weighed on the dollar and GBP/USD traded to a high of 1.5755. Cable opens this morning at 1.57. There isn’t any UK economic data due for release this morning and the focus will turn to US retail sales, due for release this afternoon.

We expect a range today in the GBP/USD rate of 1.5645 to 1.5750

Euro: The dollar weakened vs. the euro yesterday too and the EUR/USD pair ended up trading to a high of 1.2495 overnight. It’s steady this morning and trades at 1.2470. The ECB’s second targeted long –term refinancing operation will be the big event for the euro today and the central bank will be hoping this goes someway to improving liquidity conditions within the EZ – it’s designed to help improve bank lending within the economy. Meanwhile there are growing concerns about the upcoming Greek Presidential elections and the potential disruption that this might have on the EZ recovery. I’m sure there are also growing fears about what this falling oil price will mean for inflation within the euro zone. Despite this, the euro is firmer against the pound and GBP/EUR trades at 1.2600 this morning.

We expect a range today in the GBP/EUR rate of 1.2570 to 1.2630

Aussie and Kiwi Dollars: The kiwi gapped higher last night following the RBNZ monetary policy decision but mainly after Governor Wheeler’s comments. The central bank left the OCR unchanged but Wheeler went on to say that he was concerned by the recent house-price inflation in Auckland. The central bank also upgraded growth forecasts – 2014 GDP from 3.1% to 3.2% and 2016 GDP from 2.3% to 3.1%. NZD/USD jumped from .7675 to .7811 and went on to trade to an overnight high of .7866. In contrast, it was a bit of a mixed session for the aussie dollar. Employment data printed better than market expectations as the data showed 43,000 jobs were created in November. However, the unemployment rate rose to a twelve-year high of 6.3%. The continued weakness in the price of raw materials is also weighing on the currency at the moment and AUD/USD trades at .8315 currently.

We expect a range today in the GBP/AUD rate of 1.8800 to 1.8940

We expect a range today in the GBP/NZD rate of 2.0040 to 2.0185

Data Releases

AUD: No data

EUR: German Final CPI m/m, French CPI m/m, Italian Industrial Production m/m, Targeted LTRO

GBP: No data

NZD: Business NZ Manufacturing Index

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

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