United States Dollar: GBP/USD tripped through stops at 1.55 yesterday and went on to trade to a high of 1.5533 in the morning. Yellen’s comments a day earlier – although they didn’t have an immediate impact – now have markets pushing back expectations for a Fed rate hike slightly. Bank of England Governor Mark Carney was speaking again yesterday but really didn’t say too much to excite markets. Fed Chair Yellen likewise said nothing of note when she continued to testify on the Semiannual Monetary Policy Report before the House Financial Services Committee. She hinted again at rate hikes sometime this year saying “if we gain confidence and continue to see the labour market improving, we will consider still raising rates". US data was largely shrugged off – US New Home Sales beat expectations coming in at 481k vs. 471k. GBP/USD has since traded to a high of 1.5553 overnight as the dollar continues to drift lower across the board. It opens this morning at 1.5520 ahead of second estimate UK GDP data at 9:30. US inflation data is then due this afternoon and will of course be watched closely given Yellen’s comments on inflation earlier in the week when she said the Fed expects inflation to fall further before it goes higher.
We expect a range today in the GBP/USD rate of 1.5450 to 1.5580
Euro: EUR/USD and EUR/GBP have both been relatively steady over the last 24 hours. ECB President Draghi was speaking yesterday, testifying to the European Parliament. He was defending the central bank’s recent decision to implement a programme of QE but also made his views clear on the risks facing the Eurozone unless countries gave up some independence saying that “we have not yet reached the stage of a genuine monetary union”. He also said that it was up to governments to initiate economic overhauls, such as removing restrictive labour regulations, in order to boost economic activity in the region. The reaction in markets was fairly muted and EUR/USD and EUR/GBP open this morning at similar levels to yesterday morning at 1.1355 and .7315 respectively. German employment data, released a few hours ago, also printed slightly stronger than market expectations, but it too has failed to have an impact on either currency pair.
We expect a range today in the GBP/EUR rate of 1.3620 to 1.3700
Aussie and Kiwi Dollars: AUD/USD snapped lower overnight following the release of weaker than expected private capital expenditure data from Australia. The seasonally adjusted estimate for total new capital expenditure in December fell to 2.2% vs. expectations for a fall of 1.7% and AUD/USD gapped from .7885 to .7833. The currency has since rallied back to pre-CAPEX data levels and trades at .7880 this morning. NZD/USD meanwhile has made steady gains over the last 24 hours and opens this morning in London at .7585. NZ trade balance figures released overnight were mildly supportive of the move higher as the data showed a surplus in January of $56m vs. expectations for a deficit of -$158m.
We expect a range today in the GBP/AUD rate of 1.9580 to 1.9760
We expect a range today in the GBP/NZD rate of 2.0350 to 2.0560
AUD: Private Sector Credit m/m
EUR: No data
GBP: Second Estimate GDP q/q, Prelim Business Investment q/q, Index of Services 3m/3m
NZD: Building Consents m/m, ANZ Business Confidence
USD: CPI, Unemployment Claims, Durable Goods Orders m/m, HPI m/m
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