Pound bounces across the board in whippy conditions

United States Dollar:

GBP/USD drifted lower on Friday, but spiked to a high of 1.6610 as the London session finished. It eventually fell to a low of 1.6564 very late on, but has staged a rapid recovery in Asia to open this morning at 1.6630. It’s been a whippy last few sessions of trading, compounded somewhat by the fact it’s a public holiday in the U.S. today, and markets have started thinning out. US data released on Friday was generally pretty strong with Chicago PMI – the biggest release on the day – printing better than market forecasts at 64.3. This was part of the reason why we saw cable drift lower on Friday. The focus this week will be on UK PMI’s, monetary policy decisions and U.S. Non-Farm Payrolls. It’s a busy week starting with UK Manufacturing PMI this morning.

We expect a range today in the GBP/USD rate of 1.6580 to 1.6665

Euro:

EUR/USD was thumped lower on Friday. Attention in the morning was centred on European inflation data, but it didn’t really surprise with the CPI Flash Estimate y/y printing at 0.3% (as expected). The European unemployment rate was also released and caused little fuss, printing at 11.5%. The pair fell to a low of 1.3126 late on Friday in reaction to the stronger than expected US data, as well as re-positioning ahead of the long weekend in the U.S. Meanwhile the Russia/Ukraine situation continues to weigh heavily on sentiment. There’s also growing calls for the ECB to act this week when officials meet to decide on monetary policy. According to a report from Reuters, Benoit Coeure, an ECB official, said over the weekend that the central bank was ready to adjust policy and provide additional liquidity to banks if needed. Draghi’s recent comments at Jackson Hole add weight to the argument that the bank will do something this Thursday too. EUR/USD eventually fell to a low of 1.3117 early this morning but has recovered a little to open this morning at 1.3135.

We expect a range today in the GBP/EUR rate of 1.2600 to 1.2685

Aussie and Kiwi Dollars:

It’s been a steady start for AUD/USD and NZD/USD and they open this morning at .9345 and .8385 respectively. Manufacturing PMI and HSBC Final Manufacturing PMI from China printed in line with market expectations overnight and so failed to cause any shockwaves. Narrow ranges will likely continue in both currency pairs with it being a public holiday in the U.S. today but also ahead of the RBA monetary policy announcement on Tuesday. The high value of the Aussie dollar is likely to be a topic for discussion at the central bank although it’s widely expected that the RBA will leave interest rates unchanged again. Despite this the language in the statement will likely cause some reaction in the market.

We expect a range today in the GBP/AUD rate of 1.7755 to 1.7880.

We expect a range today in the GBP/NZD rate of 1.9800 to 1.9910.