United States Dollar: The pound has fallen back slightly since Friday after Standard & Poor’s downgraded its outlook on the UK’s sovereign rating to “negative” from “stable”. The ratings agency went on to state that “we believe that the UK Government''s decision to hold a referendum on EU membership by 2017 indicates that economic policymaking could be at risk”. There are various other warnings on the UK’s potential exit from the EU and this has seen GBP/USD fall back towards 1.55 – it opens this morning at 1.5530. Selling in EUR/GBP has provided some support to cable as concerns around Greece’s negotiations with its creditors go on and the dollar has remained generally weak. In fact, the dollar was so weak on Friday – despite stronger than expected producer price data from the U.S. on Friday – that GBP/USD came close to making a break of 1.56. It’s a big week for the dollar this week, although that’s not to say focus will shift too far from the Greek story. The FOMC statement is due on Wednesday at which point we’ll likely hear that economic activity has continued to pick up in the US although any move in monetary policy will be dictated by economic data. There’s a good chance that Yellen will leave the door open to a rate hike in September, although it’s not that likely to eventuate according to market pricing. UK and US CPI is also due as well as UK employment and average earnings.
We expect a range today in the GBP/USD rate of 1.5400 to 1.5600
Euro: EUR/USD slumped below 1.1150 on Friday as Greece/creditor negotiations stalled. As the day wore on, sentiment towards any deal improved as the negotiations looked set to continue over the weekend, with Athens more than likely to offer counter-proposals to its lenders. EUR/USD went on to trade to a high of 1.1290 as the feeling among investors improved but it’s fallen back this morning as it transpires that still no deal has been done with cuts to pensions being the main stumbling block. Talks will go on and the euro will likely ebb and flow in response over the next week or so. It opens at 1.1250 vs. the dollar this morning and GBP/EUR trades at 1.38.
We expect a range today in the GBP/EUR rate of 1.3755 to 1.3890
Aussie and Kiwi Dollars: Both AUD/USD and NZD/USD lost a bit of ground overnight, the former losing about 50 points as no news from Europe dragged on the pair. NZD has been more stable by comparison with Services PMI printing better than expected overnight which lent some support to the kiwi. Both currencies remain weaker vs. the pound though and GBP/AUD and GBP/NZD trade at 2.0115 and 2.2265 respectively.
We expect a range today in the GBP/AUD rate of 2.0050 to 2.0290
We expect a range today in the GBP/NZD rate of 2.2145 to 2.2370
AUD: Monetary Policy Meeting Minutes, New Motor Vehicle Sales m/m
EUR: Trade Balance, ECB President Draghi Speaks
GBP: No data
NZD: No data
USD: Empire State Manufacturing Index, Capacity Utilization Rate, Industrial Production m/m, Industrial Production m/m, TIC Long-Term Purchases
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