Sterling strengthens despite no data out

Despite the lack of data released out of the United Kingdom yesterday, the pound was able to push higher against both its major counterparts. Market movements can be put down to releases from within the bloc and across the pond, as well as speculative traders triggering key levels. Against the dollar, the pound traded in a 130 point range with lows of 1.5106 (IB) – the pound appreciated versus the Greenback and we saw the pair break above the 1.52 (IB) level. The pound recorded a 0.2 % gain against the shared currency and traded in a tight 40 pip range. The market tested the 1.40 (IB) level throughout the day’s trading session but wasn't able to break above. In spite of the lack of economic releases yesterday, the UK was able to steal some of the headlines nevertheless. With the election looming, it is believed that Cameron and the Conservatives have extended their lead over the opposition of the Labour Party to six points. Despite the slender lead, analysts are still under the impression we could see the pound weaken as there is still a lot of uncertainty with regards to the result - Tory or Labour? Single or hung parliament? Today brings a busier day of the data for the UK with both quarter-on-quarter and year-on-year GDP figures to be released. If consensus readings are missed we could see yesterday’s gains given up and reversed. Market participants will all, of course, be monitoring the election polls to try gain more of an indication of what a possible outcome could be and the effects it will have on the markets.

With the European calendar echoing the UK’s there was also very little released, with no discernible data to report on. As mentioned, the euro traded in a tight range against the pound and lost further ground throughout the day. Against the Greenback, the euro was able to gain just shy of 0.5% throughout the session and we witnessed the pair break above the 1.09(IB) level. Regardless of the fact that there was little released out of the bloc in terms of data, Greece is almost guaranteed to steal a headline a day; a Reuters survey suggested there is a 40% chance Greece will leave the eurozone. The key question is whether Greece will be able to hold onto the euro if debt payments are missed. Market participants will be eagerly awaiting Thursday’s top tier inflation data to be released; any reading below 0.0% should see further damage to the shared currency and further euro weakness. Of course eyes and ears will also be homing in on the on-goings in Greece and any developments.

Again a very quiet day of data from across the pond with the only data worth taking note of being market services PMI which fell short of the 59.0 consensus, followed by the Dallas Fed manufacturing business index which also scored a negative reading. The run of poor data from across the pond has seen the dollar soften against its major counterparts and give up some of its gains of recent weeks. As mentioned earlier in the report, we saw the Greenback consolidate above 1.52 (IB) and against the euro above 1.08 (IB) with the rate testing the 1.09 (IB) levels. Despite the dollar’s recent run of poor data, the majority of larger banks still forecast the dollar to trade sub 1.40 (IB) against the pound throughout the rest of the year and into next. Against the euro some analysts are still calling parity by Q1 of 2016. All participants will be keeping their eyes on the dollar as it is testing higher levels against both the euro and pound – the question on every one lips is how long can the bearish trend continue. Wednesday afternoon brings the unveiling of GDP figures, of course seen as top tier data, and will give us more of a thorough insight into the state of the US economy. This can of course be linked back to when a potential interest hike could occur Stateside.