– We expect a range today in the GBP/USD rate of 1.6090 to 1.6180
– We expect a range today in the GBP/EUR rate of 1.1795 to 1.1860
– We expect a range today in the GBP/AUD rate of 1.5780 to 1.5940
– We expect a range today in the GBP/NZD rate of 2.0680 to 2.0900
United States Dollar: It was a failry subdued trading session yesterday. Little data and light volumes meant GBP/USD traded a narrow 1.6100/1.6160 range. It opens this morning towards the top of this range. The data that was released yesterday (i.e. UK BRC Retail Sales) was in fact better than expected, largely down to pre VAT rise purchases. RICS house prices fell less than expected too. The main event this week will be the Bank of England monetary policy decision, so subdued trading will likley continue in the run up. Although MPC mintutes released last month indicated a very slight shift in voter sentiment (two members voting for a 0.25% rise) markets do not expect a the central bank to change interest rates or QE. The market is pricing in roughly a 25% chance of a rate hike on Thursday.
Euro: EUR/USD started off on the back foot yesterday. It fell from 1.3620 to a low of 1.3515. Poor German factory orders, which fell 3.4% m/m in December vs. expectations for -1.4% and leveraged selling of the pair were the main factors. Mild short covering in EUR/GBP continued yesterday too which put further pressure on the single currency. The trend reversed overnight however and the Euro recovered against both the USD and GBP. EUR/USD opens this morning at 1.3630 due in large part to profit taking and sovereign buying through Asia. German Industrial Production data is due any minute now and may set the tone for the rest of the day’s trading amid another quiet data day today. GBP/EUR is slightly lower this morning due to EUR/USD profit taking and after climbing to a high of 1.1918 yesterday it opens at 1.1835.
Aussie and Kiwi Dollars: Despite the release of poor retail sales data on Monday AUD/USD has resumed its push higher. The local unit was buoyed by NAB Business Confidence overnight which rose to +4 from -3 in December despite the recent floods. Australian employment data will be eyed closely in the next 48 hours. Commodities and equities continue to perform well too which has supported both AUD and NZD early this week. NZD/USD has broken through resistance at .7720 in the last 24 hours and opens higher this morning at .7770. GBP/AUD is slightly lower from where it opened this time yesterday at 1.5840. GBP/NZD is quite a bit lower and is back off of 2.1000. It kicks off this morning at 2.0750