United States Dollar: GBP/USD made decent ground in early London trading yesterday as hedge fund buying helped the pair to a high for the day of 1.6341 before it met some sturdy resistance and consolidated lower for the rest of the day, falling as low as 1.6185 as a broad greenback rally took hold. The pound was unable to make any concerted move higher as investors awaited the Bank of England interest rate announcement on Thursday and news that the most hawkish member of the BoE’s MPC, Andrew Sentance, is to be replaced by a less hawkish city economist saw the pound sold off quite heavily. This morning saw the release of some U.K. economic data, and it wasn’t overly positive with BRC retail sales coming in at -0.4% y/y, the fastest fall in retail sales in 10 months, and although RICS house price data illustrated improvement it was still on the soft side. GBP/USD didn’t really react to the news, and the pair opens this morning at 1.6180.
– Expected range today in the GBP/USD: rate of 1.6150 to 1.6250
– Expected range today in the GBP/EUR: rate of 1.1570 to 1.1670
– Expected range today in the GBP/AUD: rate of 1.5950 to 1.6050
– Expected range today in the GBP/NZD: rate of 2.1840 to 2.1950
Euro: Monday was another day of gains for the single currency, reaching a fresh high for 2011 of $1.4035 as investors continued to turn their attention away from the well publicised Euro zone sovereign debt crisis to focus on the ECB’s hawkish rate hike rhetoric. Moody’s downgrade of Greece by three notches was certainly taken in the markets stride, however the cracks in the 17-nation region’s financial stability were still very much apparent on the day with Greek Credit Default Swaps hitting a record high and 10-year Portuguese government bond yields over the 7.5% level that analysts consider so important (given that Greece and Ireland asked for bailouts once their sovereign debt yields reached comparable levels). The euro continued to fare well against sterling on the basis of relative yield differentials, but with little meaningful economic data on the day, market flows were the main determinant of intraday movements as GBP/EUR moved between 1.1580-1.1660. This morning, the poor BRC retail sales figures certainly haven’t lent any support to sterling and GBP/EUR opens at 1.1613.
Aussie and Kiwi Dollars: Tuesday saw GBP/AUD continue its rangebound moves, unable to convincingly hold a break above the 1.6100 level and GBP/NZD tracked lower from its 2.2150 highs as profit taking took hold. Investors may well have taken heart from a local newspaper report that suggested that RBNZ isn”t in a position to be cutting rates at their meeting on Thursday. However, the outlook for the NZD continues to remain uncertain as the impact from the Christchurch earthquake looks likely to weigh on the New Zealand economy for some time – the Treasury forecast that the earthquake could be a 1.5% drag on GDP. Late in the day a 3% tumble in the price of Copper and further rumours of Chinese reserve requirement hikes saw the AUD weaken somewhat. This morning the AUD was bolstered by NAB business confidence data for February, which came in at an 11 month high. GBP/AUD and GBP/NZD open this morning at 1.6007 and 2.1876 respectively.