GBP/USD continues above 1.61 as US rate hike expectations pushed out

United States Dollar:

GBP/USD - The dollar retreated further through Monday's sessions, as optimism of a US rate rise in mid-2015 waned. In an interview with Bloomberg on October 17th, the Federal Reserve Bank of Boston President Eric Rosengren stated conditions were right for the Fed to end QE after its Oct 28-29th meeting. However, he then added that the program could be extended if there is additional erosion in the outlook for economic growth. In other words if there is a continuation of data, as there was last week, showing the US recovery is not as sustained as markets thought then a rate rise will be delayed. These expectations, combined with improvements to risk sentiment as global stocks recovered, saw GBP/USD climb from an opening price of 1.61 to just below 1.6180. Overnight the pair has held above 1.6150 and we open today at 1.6160. Looking ahead the main prints are due tomorrow, with the Bank of England Minutes along with US CPI figures. However today we have UK Pubic Sector Net Borrowing for September, which is expected to show a fall to £9.2bn vs the previous months £10.883bn, plus m/m US Existing Home sales data for September.

Euro:

GBP/EUR traded a relatively flat range yesterday, hovering between 1.2610 and 1.2650. The markets opened with annualised German Producer Price Index numbers coming in as expected at -1%, while Italian Industrial Orders faltered. With the main focus being on tomorrow’s BoE Monetary Policy Committee Minutes, GBP/EUR seems to be holding around the 1.2630 mark. Today's only news comes from UK Public Sector Net Borrowing for September, so volatility may again be low. As mentioned in yesterday’s commentary we await to see if the MPC minutes are to show its members as dovish for the potential of an interest rate hike during the first part of next year. The fact that the minutes are from their meeting on 9th October, and do not incorporate the recent falls in UK CPI or the downgrades in eurozone growth, could mean the dovish sentiment does not transpire. We open today with GBP/EUR at 1.2595. EUR/USD found support as improvements to risk sentiment and a recovery in global stocks saw the dollar's gains falter. With very little data, yesterday's movements traded mainly off the back of risk appetite and as such EUR/USD rose from an opening price of 1.2750 to above 1.28. Again, there is very little data today with only the 2nd tier release of US Home sales figures before attention shifts to tomorrow US CPI readings and a host of European Service and Manufacturing PMI figures due on Thursday. We open today with EUR/USD at 1.2835.

Aussie and Kiwi Dollars:

Overnight’s better than expected Chinese GDP and Industrial Productions numbers have helped the higher yielding AUD and NZD gain against both the US dollar and sterling. Annualised Chinese GDP numbers came in at 7.3% vs 7.2% exp, while Industrial Production posted a reading of 8% vs 7.5% exp. The RBA also released its October minutes, in which it stated its current monetary policy stance is appropriate for fostering growth and most prudent course is likely to be a period of stability for rates. Both the commodity linked currencies were sold ahead of the release, but the good numbers saw AUD/USD climb to 0.8820 while NZD/USD rose to 0.8008. The Aussie and Kiwi gained roughly a cent each versus sterling and we open today with GBP/AUD at 1.8340 and GBP/NZD at 2.0210. This morning the deputy governor of the RBA, Philip Lowe, is giving a speech. However, it will most likely reiterate the RBA minutes overnight.

Data releases for the next 24 hours:

AUD: CB Leading indicator (Aug), Westpac Leading index (MoM) (Sep), Consumer Price Index (YoY & MoM) (Q3)m RBA trimmed mean CPI (QoQ & YoY) (Q3)

EUR: No Data

GBP: Public Sector Net Borrowing (Sep)

NZD: No Data

USD: Redbook Index (YoY & MoM) (Oct 17), Existing Home Sales (MoM) (Sep), Existing Home Sales Change (MoM)