United States Dollar: The dollar strengthened across the board yesterday on a fresh round of risk aversion. Fears that the Irish bailout package will not calm bond investors or stop contagion spreading to other periphery EU economies has prompted investors to move into safe haven assets like the Dollar, Yen and Swiss Franc, which have all benefitted from this new “flare up”. Worries in Asia have also driven demand for safe haven buys, as tensions rise on the North Korean border. The North launched an artillery attack on the South early this morning, in an apparent warning to the South for conducting military drills close to the border. GBP/USD dropped from 1.6080 levels down to 1.5893 in the early hours of this morning. Today we have GDP figures out of the US which will provide short term volatility. Expectations are for an increase in the rate of growth to 2.3%. Later in the afternoon we also have existing home sales from the US which is also a very important economic indicator.
– We expect a range today in the GBP/USD rate of 1.5830 to 1.6000
Euro: After officially requesting financial assistance from the EU, IMF and ECB, Ireland is now entering a fresh phase of political uncertainty, which is unnerving investors further. The markets now have clear evidence that Greece was not an isolated case, and that contagion isn’t easily contained despite huge financial assistance packages. Whilst Ireland is in a different position with regards to its funding requirements and debt expiry than other EU economies, analysts note that bond traders are still unhappy about the political upheaval post-bailout, and as such continue to shun Irish debt. EUR/USD fell from 1.3780 levels to 1.3526 this morning.
– We expect a range today in the GBP/EUR rate of 1.1650 to 1.1780
Aussie and Kiwi Dollars: The Aussie gave back its gains yesterday as European worries weighed on demand for the high yielders. AUD/USD dropped from a high at levels around 0.9950 to a low this morning of 0.9780, the lowest level in 5 days. The Kiwi followed suit and fell from 0.7837, which was yesterdays high before the credit outlook news, down to 0.7660 this morning. Tomorrow morning we have data out from Australia in the form of construction work figures and CB leading index data.
– We expect a range today in the GBP/AUD rate of 1.6130 to 1.6310
– We expect a range today in the GBP/NZD rate of 2.0675 to 2.0850
AUD: CB Leading Index / Construction Work Done
EUR: GfK German Consumer Climate
GBP: BBA Mortgage Approvals
NZD: No data of note
USD: Prelim GDP figures / Existing Home Sales / FOMC Minutes