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23 Jun 2015

The hawks are out for the USD

United States Dollar: The dollar continued on its good run during Tuesday's session and remained higher against a basket of major currencies. It was a mixed day of releases starting with FOMC member Jerome Powell delivering his take on the future of the dollar. He stated there could be 2 rate hikes this year with the first of those in September, he went on to add the central bank have set 2 targets, improvement in the Labor market and a 2% inflation target, both of these he feels are achievable by September. Following this was durable goods, it showed a decline of 1.8%, and only a 0.6% drop was to be expected. The final release of the day was new home sales, this showed a jump of 2.2%, the highest level since 2008. This coupled with the strong existing home sale figures on Monday gives us a clear indication the housing market is certainly picking up, but we must be mindful this could be down to seasonal adjustment. With no data to digest for the Pound yesterday and a very quiet week ahead the greenback was able to accelerate its run and GBP/USD was down another 0.56% touching a low of 1.5711. The biggest gain for the dollar was felt against the euro, climbing 1.5% to touch a high of 0.8972, the euro experiencing its biggest one day sell-off.

We expect a range today in the GBP/USD rate of 1.5710 to 1.5840

Euro: The upbeat news we had coming out of the Eurozone regarding the Greek bailout agreement was only short lived, optimism has turned to uncertainty and any gains were soon erased throughout Tuesday’s session. Whilst there is still hope a deal will be done by the end of the week it is being approached with caution placing pressure on the Euro. The single currency even shrugged off data showing that private sector activity in the euro area expanded at the fastest pace in four years this month. The purchasing managers index, which looks at both the manufacturing and service sectors, rose to 54.1 from a final reading of 53.6 in May. It was the highest level since May 2011 and above forecasts for a reading of 53.5. France’s manufacturing sector expanded for the first time since April 2014 this month and the German private sector activity also expanded at a faster-than-expected pace. EUR/GBP slid 0.6% touching a low of 0.7084 and against the greenback we touched 1.1145, the lowest level since June 8th.

We expect a range today in the GBP/EUR rate of 1.4060 to .14150

Aussie and Kiwi Dollars: With another quiet Asian session both the Aussie and Kiwi were able to advance yesterday afternoon and claw back some previous losses. On the back of the poor durable goods number in the states and being optimistic a Greek deal is imminent, late in the afternoon we saw both currencies surge as the risk appetite sweetened, with GBP/AUD dropping to 2.0350 and GBP/NZD to 2.2911. During the opening hours of the London session this morning both have lost those earlier gains after the Japanese central bank meeting minutes released early hours made reference to ‘concerns about a slowdown in china and whether inflation expectations overall would rise’. Markets are also pricing in a strong mortgage approval number from the UK today.

We expect a range today in the GBP/AUD rate of 2.0330 to 2.0480

We expect a range today in the GBP/NZD rate of 2.2930 to 2.3075

Data Releases

AUD: No Data

EUR: German IFO Business Climate, Eurogroup Meetings

GBP: BBA Mortgage Approvals

NZD: No Data

USD: Final GDP q/q

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