Foreign Exchange Daily Market Commentary – UKForex – 10/12/2010

Foreign Exchange Daily Market Commentary – UKForex – 10/12/2010

:: United States Dollar: As expected the Bank of England left interest rates and QE unchanged yesterday. GBP/USD did not budge on the news. Focus has seemingly strayed from European peripheral debt concerns to volatile US yields, this following the US government”s decision to extend tax breaks. Despite this, action in GBP/USD has been pretty quiet overnight and throughout much of yesterday. It opens this morning at 1.5820. Meanwhile data showed that the UK trade deficit widened by more than expected to -£8.5 billion which briefly knocked the pound lower and US initial jobless claims came in just under expectations. UK PPI and US trade balance are due for release today.

– We expect a range today in the GBP/USD rate of 1.5760 to 1.5860

:: Euro: The negative news flowed out of Europe yesterday. Fitch, the ratings agency, downgraded Ireland to BBB+. Later that afternoon there was one wire which suggested that the Irish opposition party will vote against the much talked about bailout package. It saw EUR/USD slip back under 1.3200 after starting the day above the 1.3300 figure. It eventually traded to a low of 1.3180 but has recovered mildly throughout Asia and opens at 1.3270 in London. I think we can put this down to profit taking following full digestion of the news. The Euro fell vs. GBP yesterday too. GBP/EUR eventually traded to a high of 1.1950. This cross is now clearly knocking loudly on the door of 1.2000. It trades at 1.1920 currently.

– We expect a range today in the GBP/EUR rate of 1.1880 to 1.1960

:: Aussie and Kiwi Dollars: AUD/USD is range bound and has been over the last 24 hours. Local Aussie dealers are a little reluctant to go long given the possibility of a Chinese base rate hike this weekend. Also the news re: Ireland yesterday has heightened the caution. AUD/USD opens at .9850. In contrast there has been some good buying interest in NZD/USD this morning. It has so far been bid on the news overnight that NZ terms of trade increased in the Sept quarter by 3%. It is perhaps a good excuse for NZD/USD traders to take profit following a week of losses for the kiwi (this following the RBNZ decision earlier in the week). It opens this morning at .7505 having slipped to a low of .7455 yesterday afternoon. Both GBP/AUD and GBP/NZD are steady this morning and trade at 1.6030 and 2.1060 respectively.

– We expect a range today in the GBP/AUD rate of 1.5920 to 1.6100

– We expect a range today in the GBP/NZD rate of 2.0960 to 2.1110


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