Foreign Exchange Daily Market Commentary – UKForex – 04/10/2010

Foreign Exchange Daily Market Commentary – UKForex – 04/10/2010

United States Dollar: The pound is slightly off the boil this morning, having fallen under 1.5800 overnight against the US dollar. This comes despite the continuous weakness and sell-off in the greenback over the last few weeks (ever since the Fed hinted at QE2). Figures however on Friday showed that UK manufacturing grew at its slowest pace in almost a year, another poor set of UK economic data. Chancellor George Osborne is also due to speak this afternoon, when he is expected to announce spending cuts. He has already announced a child benefit payment cut for higher-rate taxpayers. His speech this afternoon will be the focus for markets while markets will also be paying close attention to US pending home sales figures released later this afternoon and a Bernanke speech.

– We expect a range today in the GBP/USD rate of 1.5720 to 1.5860

Euro: The Euro is still the darling of the currency market, despite the backdrop of social unrest and spending cuts in Europe. Ever since the Fed hinted at further quantitative easing during its interest rate meeting 2 weeks ago the USD has fallen steeply against a range of currencies and particularly so against the single currency. European data is starting to show some signs of improvement too, although this was not the case on Friday. German retail sales fell by 0.2% vs. expectations for a 0.5% rise. Figures showed that European unemployment rose by more than expected too on Friday although by only 0.1% more, being 10.1%. EUR/USD has fallen from the 1.3810 high achieved late on Friday and it opens this morning at 1.3710. EUR/GBP continues to be well bid, owing largely to the threat of UK government spending cuts and further Bank of England quantitative easing. GBP/EUR trades at 1.1505 this morning.

– We expect a range today in the GBP/USD rate of 1.1490 to 1.1620

Aussie and Kiwi Dollars: The Aussie dollar remains strong this morning. It has however fallen back below the .9700 figure as traders look to take profit ahead of the Reserve Bank of Australia interest rate decision on Tuesday. There is growing anticipation that the RBA will lift interest rates by a further 25 basis points, although some uncertainty does still cloud things (73% chance of a rate hike currently). A lot will also depend on what the RBA have to say in any accompanying statement and whether they show any intentions to hike further in the near term. This might mean that parity with the USD becomes even more likely. NZD/USD also remains strong this morning and trades at .7410 currently. GBP/AUD and GBP/NZD remain low as a result and trade at 1.6335 and 2.1300 respectively.

– We expect a range today in the GBP/AUD rate of 1.6280 to 1.6390

– We expect a range today in the GBP/NZD rate of 2.1260 to 2.1380

Data Releases:

  • AUD: AIG Services Index, Trade Balance, NAB Business Confidence. Retail Sales, RBA Interest Rate Announcement
  • EUR: Producer Price Index
  • GBP: No data due for release today
  • NZD: NZIER Business Confidence
  • USD: Pending Home Sales, Factory Orders

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