Draghi tells us nothing new as euro steadies

United States Dollar:

Cable slowly made its way higher throughout the day yesterday. It then popped higher again in the early Tokyo session and ended up trading to a high of 1.6389. There’s a bit more confidence in the pound again following the ‘no’ vote on Scottish independence last week, and this may well continue to shine through until the end of the week. The US dollar has also been sold off, prompted in part by the release of weaker than expected US existing home sales yesterday. The selling momentum continued as markets in Asia opened. The GBP/USD pair has snapped lower this morning however as key support levels in the GBP/JPY cross rate have been broken. In other news, the U.S. launched air strikes on Islamic State targets in Syria overnight. There aren’t many more details on this but it’s likely to dominate the headlines for a little while and may eventually start to have an impact on FX markets. We expect a range today in the GBP/USD rate of 1.6245 to 1.6365.

Euro:

EUR/USD has also fallen over the last 24 hours, since the release of the better than expected US data. It dropped to a low of 1.3192 overnight and opens this morning at 1.3220. In another unsurprising move, the European Central Bank left interest rates and its QE program on hold yesterday. ECB president Mario Draghi said in his accompanying press conference that interest rates would remain on hold for an extended period, just like last time, and that the economy was showing some signs of a recovery. EUR/USD didn’t react to the announcement and has only really come off in response to the stronger US data. The euro popped up vs. the pound early this morning and traded to a high of .8744 as the European session began. It has been sold off since however, probably in response to negative employment data from Spain – the registered number of unemployed at the end of July 2013 fell by 64,866 persons vs. an expected -80,000. It now trades at .8730.

Aussie and Kiwi Dollars:

The Aussie dollar started to crumble during the London session yesterday. Commodity prices were looking a bit heavy early in the week, whilst the AUD came under further selling pressure after a senior director from Roubini Economics told a Sydney newspaper yesterday: “the Australian dollar is likely to weaken to below US75¢ – a fall of around 20% – on a combination of the lower interest rate differential and slumping GDP growth, with commodity price effects outweighing volumes”. NZD/USD has tracked the other commodity currencies lower too, this after popping higher yesterday following the election results over the weekend. We expect a range today in the GBP/AUD rate of 1.8300 to 1.8440. We expect a range today in the GBP/NZD rate of 2.0010 to 2.0170.

Data releases for the next 24 hours:

AUD: CB Leading Index m/m, RBA Financial Stability Review

EUR: No data

GBP: BBA Mortgage Approvals, Public Sector Net Borrowing

NZD: Trade Balance

USD: Flash Manufacturing PMI, Richmond Manufacturing Index