Foreign Exchange Daily Market Commentary – UKForex – 09/11/2010

Foreign Exchange Daily Market Commentary – UKForex – 09/11/2010

United States Dollar: The USD starts this morning’s trading up against all major currencies bar the yen. It seems that the market now believes there is value in the dollar after a sustained period of selling in the build up to, and after the announcement of further QE last week. Though perhaps this is simply a bit of profit taking from traders who believe the dollar has hit the bottom in the short term? The markets will have an eye on industrial production data due for release in the UK this morning though it’s likely that more attention will be given to tomorrows inflation report delivered by the Bank of England tomorrow. Whilst the pound has looked strong since last week’s decision to avoid further QE, there is a note of caution with weak housing data overnight, if this is followed by further poor announcements today and tomorrow the pound could be vulnerable and open to downside movement. Staying above 1.60 this week, would be significant for Stirling it will be interesting to see if yesterdays dollar gains are repeated again today.

– We expect a range today in the GBP/USD rate of 1.594 to 1.62

Euro: EUR has had a tough start to the week, primarily because Germany are beginning to doubt the strength of other European economies and have genuine fear that theyll be called upon to bail out the likes of Ireland and Greece which doesnt sit well with the German people or their chancellor, Angela Merkel. At present Merkel is meeting with other members of the G20 to discuss, amongst other things protectionism and the perceived currency wars which she fears will be the single biggest factor in delaying a global recovery. The main contributors to this are China and the US so chances of a speedy resolution are low, though there is a wide acceptance that agreements between leaders are needed and soon. The pound had a strong day against EUR yesterday and opens this morning over 1.16, can it hold or make further gains today?

– We expect a range today in the GBP/EUR rate of 1.155 to 1.165

Aussie and Kiwi Dollars: Its business as usual for the AUD today. Still above the significant parity level and perhaps significant that the USD made little gains against the AUD compared with many other major currencies. The Aussie traded in a tight range yesterday which is uncharacteristic for a typically volatile currency, it looks set for the same today perhaps traders are still digesting the outcome of last week’s price action. Australian employment figures are due for release tomorrow and expectation is for another fall in the rate of unemployment. This is likely to be the main focus for the AUD this week. News from the finance minister in NZ suggests a weak USD is not helping the export led NZD. It is no secret that the government in NZ are uncomfortable with its currency around this level and so their attention will doubtless be on the G20 meeting in South Korea this week where discussions will continue on the fair value of the world’s biggest currencies. The current GBP/NZD rate is sitting around historic lows so when and how can the pound stop this freefall? Appetite for the high yielding NZD remains strong. GBP/AUD trading at 1.59 this morning.

– We expect a range today in the GBP/AUD rate of 1.585 to 1.609

– We expect a range today in the GBP/NZD rate of 2.038 to 2.056

Data Releases:

AUD: Westpac Consumer Sentiment, Home Loans m/m
EUR: German Final CPI m/m, French Gov Budget Balance, French Trade Balance
GBP: Manufacturing Production m/m, Trade Balance, Industrial Production m/m
NZD: RBNZ Financial Stability Report
USD: Wholesale Inventories m/m, IBD/TIPP Economic Optimism

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