United States Dollar: On the back of the Irish bail out plans we witnessed a mild relief rally in most currencies vs. the USD yesterday, including in GBP/USD. Unfortunately it did not last long and attention soon switched to the debt problems facing both Portugal and Spain currently. Risk aversion intensified and the usual safe haven demand for the USD increased. GBP/USD fell to a low of 1.5525 overnight and it opens this morning at 1.5560. One potential positive for the pound yesterday was an announcement by the Office for Budget Responsibility. They raised their estimate for economic growth this year, from 1.2% to 1.8% and predicted that after peaking above 8% in 2011 the unemployment rate would fall to just over 6% by 2015. European debt issues have been the overriding concern within the FX market however and the announcement by the OBR failed to lift GBP/USD. Also weighing on the pound overnight was the release of weaker than expected GfK consumer confidence figures.
– We expect a range today in the GBP/USD rate of 1.5440 to 1.5590
Euro: EUR/USD briefly came close to breaking through 1.3300 yesterday morning as news of the Irish bail-out plan was digested. As already stated the relief did not last. European equities were sold heavily and spreads on European debt widened again yesterday as Portugal and Spain both found themselves the subject of speculation for another Irish style bail-out. EUR/USD fell to a low of 1.3080 overnight and looks fragile this morning at 1.3110. We might see some month end buying today which could perhaps save the Euro and it is a market that has gone heavily short in EUR/USD over the past week. That support is likely to only be temporary though as a risk averse market continues to seek shelter in the USD. GBP/EUR is holding firm this morning and after slipping below 1.1800 yesterday morning it now trades at 1.1880.
– We expect a range today in the GBP/EUR rate of 1.1840 to 1.1940
Aussie and Kiwi Dollars: Risk aversion and a broadly stronger USD has meant that both AUD and NZD open lower against the greenback this morning at .9610 and .7445 respectively. Positions have been reduced in AUD/USD longs and according to IMM data these positions now total $4.3 billion compared to $8.5 billion in early October. This might mean that selling in AUD/USD and NZD/USD becomes less aggressive in the short/medium term but it is likely of course to depend on developments out of peripheral Europe. On a positive note figures released overnight showed that Australia”s building approvals rose 9.3% in October vs. expectations for a 1.6% rise. It has failed to have a positive impact on AUD/USD heading in to the London morning session however. GBP/AUD and GBP/NZD are both slightly higher currently and trade at 1.6190 and 2.0890.
– We expect a range today in the GBP/AUD rate of 1.6160 to 1.6300
– We expect a range today in the GBP/NZD rate of 2.0830 to 2.1020