United States Dollar: GBP/USD was stable in Asian trade yesterday, ranging between 1.5554/1.5601 and was able to breach the 1.5600 level conclusively early in Europe after some good sized cable buying in interbank trade. There was also a particularly bullish piece on sterling found in the Telegraph which is likely to have lent some support early on. We saw a high of 1.5628 before it was forced lower after U.K. Construction PMI data came in below the all important 50 level (indicating contraction in the sector). U.S. data surprised on the upside with ADP Employer Services data showing that company employment increased by 297,000 in December, and later in the form of the non-manufacturing ISM index which certainly lent some support to the greenback and subsequently the pair slipped back down towards the 1.5450 area later in the day. GBP/USD opens today at 1.5505.
– We expect a range today in the GBP/USD rate of 1.5400 to 1.5620
Euro: EUR/USD fell in early trade yesterday after the FOMC minutes, which acknowledged improvements in recent U.S. economic data, had been digested by traders. The decline in the price of Gold was also given as one of the main reasons for greenback buying. The euro certainly wasn’t helped after a report from property website daft.ie showed that declines in asking prices for Irish homes accelerated in Q4 2010 and furthermore news that the Swiss National Bank confirmed that it would no longer accept certain Irish government bonds as collateral. This saw GBP/EUR moving above the 1.1765 level for the first time this week and EUR/USD breaking below the 1.3250 level. Eurozone debt concerns resurfaced after a sale of Portuguese six-month bills fetched higher yields than a previous auction and after the surprise ADP Employment data numbers EUR/USD dropped sharply, forced as low as 1.3125. The euro was undermined further after Belgium failed to form a government after its most recent round of talks. GBP/EUR had a high for the day of 1.1806 and opens this morning around 1.1800.
– We expect a range today in the GBP/EUR rate of 1.1700 to 1.1850
Aussie and Kiwi Dollars: Yesterday the start of trading saw very little in the way of news, though the sharp decline in commodity prices as well as the flooding in Queensland continued to weigh heavily on the AUD, with RBA member Donald McGauchie commenting that the disaster may have a significant impact on the nation’s economy due to interruption in the export markets, particularly the wheat and coal industries. AUD/USD was the most volatile pair early on, moving between 1.0013/75 as the market tried to make sense of the recent downward move to see if perhaps a longer term reversal was in place. MSCI Asia Pacific equity index was down 0.5% and further AUD selling occured after a HIA report showed that Australian New Home Sales fell 0.2% in November. In European trade AUD/USD broke below the parity level, as commodities continued their slide and U.S. data coming in better than estimates in the form of the ADP Employer Services report and non-manufacturing ISM bolstered greenback strength. Later in the day commodities did rebound slightly which saw a move back above parity, however the day ended with the pair consolidating around the 1.0000 level. The antipodean currencies continued to fare better against sterling with GBP/AUD breaking through 1.5600 and GBP/NZD reaching a high for the day of 2.0474. GBP/AUD and GBP/NZD open this morning at 1.5550 and 2.0475 respectively.
– We expect a range today in the GBP/AUD rate of 1.5450 to 1.5620
