United States Dollar:
The pound fell to a low of 1.6168 vs. the dollar yesterday, following the release of weaker than expected UK current account data. The deficit was £23.1 billion in the second quarter of 2014, up from £20.5 billion in Q1 and a lot bigger than the forecasted £16.9 billion. At the same time, final Q2 GDP came in at 0.9% vs. expectations for 0.8%. It was a slight improvement, but as far as the pound was concerned the deficit number was damage enough. It was also dragged lower by the sell-off in EUR/USD, which broke key support levels under 1.2650 and 1.2600 yesterday. The dollar continued to strengthen yesterday morning too, supported in part by a story – later denied – that Russia was considering capital controls, meaning funds wouldn’t be allowed to leave Russia. Risk was sold on the news and demand for the likes of US treasuries got a boost. The dollar then gave up some of these gains later in the session, following the release of slightly weaker than expected US economic data, including Chicago PMI and CB Consumer Confidence. The focus in terms of data today will be on manufacturing, with releases from the UK and US. US ADP Non-Farm Employment is also due and is an important front-runner to the Non-Farm Payrolls on Friday. We expect a range today in the GBP/USD rate of 1.6140 to 1.6245.
Euro:
EUR/USD was dumped yesterday. It broke down through stop loss orders under 1.2650 and 1.26, and ended up trading to a low of 1.2571. There’s building consensus that the ECB will act on monetary policy again before the end of the calendar year, and the possibility of further forms of QE and interest rate cutting is weighing on the single currency. GBP/EUR is at 2.5 year highs as a result, and opens this morning at 1.2845.
Aussie and Kiwi Dollars:
The Aussie was sold on the back of weaker than expected Australian retail sales data, released overnight. August sales rose by only 0.1% vs. expectations for 0.4%, and AUD/USD fell from .8715 to a low of .8665. It went on to trade to a low of .8660 overnight (or early this morning), but is recovering in the London session as traders endeavour to make some profit. Meanwhile, NZD/USD has been steady during the last 24 hours and GBP/NZD remains firm at 2.0765.
Date Releases for the next 24 hours:
AUD: HIA New Home Sales m/m, Building Approvals m/m, Trade Balance, RBA Annual Report
EUR: Italian Manufacturing PMI, Final Manufacturing PMI
GBP: Manufacturing PMI
NZD: ANZ Commodity Prices m/m, GDT Price Index
USD: ADP Non-Farm Employment Change, Final Manufacturing PMI, ISM Manufacturing PMI, Construction Spending m/m
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