Foreign Exchange Daily Market Commentary – UKForex – 18/10/2010

Foreign Exchange Daily Market Commentary – UKForex – 18/10/2010

United States Dollar: The dollar strengthened into the close on Friday on the back of short term reversals and profit taking. After hitting a high of 1.6107 on Friday afternoon GBP/USD sold off to finish around 1.5980, before opening in late evening yesterday and falling further. Worries surrounding the upcoming budget cuts in the UK have taken the sheen off the Pound in the short term, as investors wait to see just what cuts will be unveiled at the meeting on Wednesday. In the Telegraph this morning British state workers have stated that they are more than prepared to take strike action over the impending cuts. 49% of state workers surveyed by the Chartered Institute of Personnel and Development agreed with a statement that alluded to taking strike action to “protect their jobs”. There are further consolidation risks ahead of the meeting (11:00 GMT on Wednesday this week). GBP/USD opens at 1.5880 levels this morning.

– We expect a range today in the GBP/USD rate of 1.5800 to 1.6000

Euro: Short term profit taking drove the Euro lower against a basket of currencies towards the close on Friday. It was less a move back into safe haven assets and more an unwinding of long positions establish throughout the week. EUR/USD has stabilized at levels around 1.3875 this morning but has potential to consolidate further to the downside ahead of European data out tomorrow in the form of the ZEW survey from Germany. In other news, the ECB’s Nowotny has stated that the bank will not take part in intervention measures to halt the Euro’s appreciation against the dollar, adding that the ECB has no exchange rate goal, and therefore no cause to intervene. GBP/EUR rallied in the early hours of this morning on the back of these unwinds and traded as high as 1.1485 before retreating to 1.1440 levels where we open this morning.

– We expect a range today in the GBP/EUR rate of 1.1375 to 1.1520

Aussie and Kiwi Dollars: The Aussie also fell victim to the profit takers at the end of last week. After a stellar rise to levels just short of parity against the US dollar, the Aussie dropped to 0.9860 levels toward the end of the week’s trading. On open the Aussie continues to fall, heading towards the 0.9800 levels seen at the beginning of last week. Tomorrow morning we have RBA meeting minutes which will provide some colour as to policy moves in the short term. In New Zealand, despite higher than expected inflationary data, the Kiwi sold off from a high of 0.7620 to 0.7510 where we open this morning. Consumer prices rose by 1.1% from the second quarter, lead by higher charges on energy and tobacco. Expectations were for a 1% rise, and despite the higher quarterly reading annual inflation remains at the lowest levels in six years (at 1.5%).

– We expect a range today in the GBP/AUD rate of 1.6050 to 1.6200

– We expect a range today in the GBP/NZD rate of 2.1000 to 2.1220

Data Releases:

  • AUD: Monetary Policy Meeting Minutes
  • EUR: No data of note
  • GBP: No data of note
  • NZD: No data of note
  • USD: TIC Long term purchases / Capacity Utilization / Industrial Production


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