United States Dollar: The USD sell off took some of us by surprise yesterday. This came as Moody”s the ratings agency stated that the US tax plans will increase the likelihood of a negative outlook on the US AAA rating over the next couple of years. Dollar treasury yields slumped and GBP/USD snapped higher gapping from 1.5760 to 1.5870. There is also a very real chance that the Fed will announce this evening during its monetary policy statement that it is open to further debt purchases above $600 billion, although this view has been aired previously by Fed Chairman Bernanke so should not come as too much of a surprise. GBP/USD holds on to its recent gains this morning. It opens the London session at 1.5895. The pound remains strong against the greenback this morning despite some fairly negative comments by BoE MPC member Bean yesterday. He said that further QE might be necessary if UK growth worsens, which might happen if problems persist in peripheral Europe. The calendar is pretty heavy today which might make for further volatility in the FX market. First up is UK CPI, followed by US retail sales and then the FOMC statement this evening (UK time).
– We expect a range today in the GBP/USD rate of 1.5710 to 1.5990
Euro: The USD fell across the board yesterday. EUR/USD went from 1.3200 yesterday morning to 1.3440 overnight. Europe and London have followed on from where Asia left off and have continued to sell the greenback this morning. EUR/USD opens at 1.3455. It seems the market in EUR/USD was caught a little short too which exaggerated the move higher yesterday, overnight and early on this morning. A report on the ECB seeking further capital in case of increased losses to its bond portfolio was shrugged off yesterday too. It might be natural to expect some consolidation today ahead of the FOMC statement this evening and given the steep rise in EUR/USD over the last 24 hours, although key resistance at 1.3450 has just been broken. GBP/EUR has fallen back quite a bit during the last day. After coming close to pushing through 1.2000 yesterday it now trades at 1.1800.
– We expect a range today in the GBP/EUR rate of 1.1780 to 1.1860
Aussie and Kiwi Dollars: AUD/USD is close to pushing back through parity this morning. It opens today at .9975. NZD/USD also pushed higher yesterday of course and reached a high of .7570. However the release of much weaker than expected NZ retail sales data which printed overnight saw the kiwi sold off again and it fell back towards the .7500 figure and below. It opens this morning at .7535. Retail sales fell 2.5% (vs. expectations for -0.8%) and it was put down to a pre-GST rise in September. It means that GBP/NZD traded to a high of 2.1168 overnight. It opens at 2.1070 this morning. GBP/AUD is fairly steady and opens up at 1.5920.
– We expect a range today in the GBP/AUD rate of 1.5840 to 1.6040
– We expect a range today in the GBP/NZD rate of 2.0960 to 2.1160