:: United States Dollar: GBP/USD made it through the 1.5800 figure yesterday morning, eventually trading to a high of 1.5820 as equities in both the UK and Europe performed strongly. It is lower this morning however following a decision made by US President Obama and his government to extend Bush era tax cuts, which has failed to find favour with Democrats. In his speech yesterday Obama vented his frustration over his own party”s opposition at this latest agreement and according to reports he appeared “testy”. US yields rallied on the news with the 3 and 10 year auction closing above 3% yesterday. It has meant that the USD has strengthened across the board. Also aiding dollar strength over the past 24 hours is safe haven demand following news that tensions in Korea are increasing. According to TV reports in Korea artillery shells fell in North Korean waters, near to the boarder overnight. There also appears to be some uncertainty over whether China will increase interest rates this weekend. Rumours are that Chinese CPI data will be released around the same time and will be strong. GBP/USD fell to a low of 1.5671 early on this morning and opens up at 1.5715.
– We expect a range today in the GBP/USD rate of 1.5610 to 1.5740
:: Euro: EUR/USD has fallen from 1.3390 over the last 24 hours and opens at 1.3220 this morning for much of the same reasons mentioned above. The USD is broadly stronger following the US decision to extend tax cuts. This comes despite positive rumours that the Irish budget is likely to pass government approval after being presented to parliament yesterday. The government is believed to have the support of 82 MPs. This has helped EUR yields to narrow slightly but it is USD strength that has dominated proceedings during the past 24 hours. EUR/GBP has also been sold off during the past few sessions. Figures showing that Germany’s trade surplus narrowed this morning have not helped the single currency. GBP/EUR is now close to breaking 1.1900 and it opens this morning at 1.1895.
– We expect a range today in the GBP/EUR rate of 1.1860 to 1.1960
:: Aussie and Kiwi Dollars: As commodity prices and equity prices rallied yesterday AUD/USD traded to a high of .9960. NZD/USD also pushed higher through .7650. We have seen quite a steep reversal overnight however as the USD firms across the board. Perhaps of more significance to the Australian economy and currency is the possibility that China may tighten monetary policy this weekend to help contain its rapidly growing economy. The theory is that this will have an impact on Chinese demand for Australian resources such as iron ore. The fall comes despite news overnight that home loans rose in Australia by 1.9% month on month vs. expectations for a 0.1% rise. AUD/USD and NZD/USD open at .9770 and .7490 respectively. New Zealand financial markets will turn their attention to the RBNZ interest rate decision and accompanying statement on Thursday. More on this in tomorrow’s commentary. GBP/AUD and GBP/NZD are both slightly higher this morning and trade at 1.6060 and 2.0970.
– We expect a range today in the GBP/AUD rate of 1.5910 to 1.6140
– We expect a range today in the GBP/NZD rate of 2.0900 to 2.1060