United States Dollar:
It was a risk off morning yesterday. The dollar strengthened and GBP/USD meandered lower as investors keenly awaited a plethora of data and market moving events from the States. US ADP Non-Farm Employment Change was first up and printed weaker than expected; companies added 218,000 workers in July vs. expectations for 234,000. Fifteen minutes later Advance 2nd quarter GDP q/q was released, rising to an annualised rate of 4% vs. expectations for 3.2%. It was a big surprise - brought on by big gains in consumer spending and business investment – and the dollar jumped. GBP/USD eventually bottomed out at 1.6890. As for the FOMC statement, it failed to live up to expectations of the hawks. As expected the Fed tapered its QE program by a further $10 billion and kept interest rates at 0.25%. In the statement the central bank said that "a range of labour market indicators suggests that there remains significant underutilization of labour resources." With regards to inflation they said that the likelihood of inflation running persistently below 2% had diminished somewhat but that accommodative policy would be appropriate for “considerable time” after the end of the asset purchase program. No great surprises there but the dollar softened on the news as those hoping for some kind of signal of an interest rate hike were left disappointed. GBP/USD recovered to 1.6926 but it is falling off again this morning following comments by the Bank of England’s Ben Broadbent. He has said in an interview with Bloomberg that it’s quite possible that the pound is overvalued, amongst other things. Meanwhile German employment data has just been released and has come in better than expected which is causing EUR/GBP to rally. As a result GBP/USD opens this morning at 1.6885.
We expect a range today in the GBP/USD rate of 1.6850 to 1.6945
Euro:
EUR/USD fell in line with most other currencies vs. the dollar yesterday, this mainly as a result of the stronger than expected GDP data. Despite the mildly better than expected German inflation data , also released yesterday, EUR/USD ended up slumping to a low of 1.3367. It recovered post FOMC statement and opens this morning at 1.3390. A run of positive economic data has been released from Europe this morning, including German Retail Sales, German Unemployment Changes and French Consumer Spending but despite this EUR/USD has failed to make a convincing break back through 1.34. Investors are perhaps a bit cautious to bid the single currency higher ahead of European inflation data this morning and amid the risk off nature of trading currently. Meanwhile GBP/EUR has fallen this morning in light of the solid European data and trades at 1.26 currently.
We expect a range today in the GBP/EUR rate of 1.2580 to 1.2640
Aussie and Kiwi Dollars:
It’s been a fairly quiet session again for both AUD/USD and NZD/USD. Australian building approvals data was released overnight and came in weaker than expected which has put some downward pressure on the Aussie whilst NZD/USD has settled within a steady range and opens in London at .8485.
We expect a range today in the GBP/AUD rate of 1.8100 to 1.8240
We expect a range today in the GBP/NZD rate of 1.9800 to 1.9990
Data Releases for the next 24 hours:
AUD: AIG Manufacturing Index, PPI q/q
EUR: CPI Flash Estimate y/y, Unemployment Rate, Italian Prelim CPI m/m
GBP: No data
NZD: No data
USD: Challenger Job Cuts y/y, Unemployment Claims, Employment Cost Index q/q, Chicago PMI
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