United States Dollar:
Sterling ended on a high last week after it held its gains following the much better than expected UK employment data released on Wednesday. Instead of holding steady at 7.2% like the markets were expecting, UK unemployment dropped to 6.9%, prompting cable to jump to 1.6818 from 1.6720. It pushed even higher after Janet Yellen’s dovish comments at a talk in New York on Wednesday evening, hitting resistance around the 1.6840 level. Thursday saw US unemployment claims print 304k (vs. expected 316k) while the monthly Philly Fed Manufacturing survey also beat expectations with a reading of 16.6 – up from 9.0 the month before. The survey reported that price pressures were relatively moderate and future indicators remained positive. It appears that the weather-affected data releases are well behind us. GBP/USD currently trades at 1.6815. Later today, we have Existing Home Sales data from the States, which is expected to show an annualised figure of 4.57m.
We expect a range today in the GBP/USD rate of 1.6775 to 1.6845.
Euro:
Thursday saw more deflationary worries from the eurozone after Germany’s monthly Producer Price Index showed a steep fall, printing -0.3%, down from 0.0% the month before and much worse than the reading of 0.1% the markets were expecting. The markets will already be looking to next Wednesday’s Eurozone Flash CPI estimate, and any further fall from the current 0.5% is likely to force the ECB’s hand. Despite the possibility of a rate cut, another LTRO or actual QE in the coming months, the euro remains well-supported and currently trades at 1.38 against the dollar. It is a data-thin day today with no releases of any note from the eurozone. Tomorrow sees French, German and Eurozone PMI data with Mario Draghi talking in Amsterdam on Thursday morning, so expect some volatility as the week goes on. GBP/EUR currently trades at 1.2180.
We expect a range today in the GBP/EUR rate of 1.21 to 1.22.
Aussie and Kiwi Dollars:
Thursday saw a couple of data releases of note from Australia. The monthly New Motor Vehicle Sales release showed a fall of -0.3% from the previous month. At the same time the NAB Quarterly Business Confidence survey was released, which also showed a fall, dropping to 6 from the previous reading of 8. The report painted a picture of a relatively subdued 2014 for Australia, with business confidence slipping. It estimates growth to be currently running at an annualised rate of 3% (below the long-term average) and warned of the impact of the strengthening Aussie dollar. Australian Quarterly CPI is released tonight with the markets expecting no change at 0.8%. Tonight also sees the monthly HSBC Flash Manufacturing PMI from China, and the markets are predicting a reading of 48.4 compared to last month’s 48. New Zealand is expected to raise interest rates again on Wednesday night, increasing its Cash Rate to 3% from 2.75%. AUD/USD currently trades at .9355 with GBP/AUD at 1.7970. NZD/USD currently trades at .8585 with GBP/NZD at 1.9590.
We expect a range today in the GBP/AUD rate of 1.79 to 1.8050.
We expect a range today in the GBP/NZD rate of 1.95 to 1.9650.
Data releases for the next 24 hours:
AUD: CPI q/q, Trimmed Mean CPI q/q
EUR: No data
GBP: No data
NZD: No data
USD: Existing Home Sales
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