United States Dollar: There was an element of “risk on” during early London trade yesterday as GBP/USD surged upwards by more than 150 points after stronger than expected UK PMI data; the gauge of manufacturing activity came in at a 16 year high of 58.3, compared to 57.5 in November. We also saw UK mortgage approvals data from the Bank of England come in slightly higher than economist estimates. This data along with a statement from Chancellor George Osborne that the UK government is not planning on any further tax increases garnered good support for the pound. GBP/USD got up to 1.5645 before consolidating around the high 1.55’s. Data from the U.S. Commerce Department showed that factory orders grew more strongly than expected in November, yet another sign of improvement in the U.S. economy. The FOMC minutes caused little reaction in the markets as the Fed said that whilst growth in the U.S. was improving, they didn’t yet have the confidence in the economy to remove QE2. GBP/USD opens today at 1.5540.
– We expect a range today in the GBP/USD rate of 1.5430 to 1.5650
Euro: EUR/USD was able to break through the 1.3400 level during European trade yesterday after hotter than expected inflation data from the Eurozone; the reading came in above the ECB’s 2% target for the first time since October 2008 – a consequence of high commodity prices over recent months. It seemingly shrugged off a separate report which showed that German unemployment unexpectedly rose in December for the first time in 17 months. On the back of the U.K. mortgage approval data GBP/EUR was able to move to a high of 1.1734, leaving the pound up 1.4% against the euro for the day. GBP/EUR opens this morning at 1.1717.
– We expect a range today in the GBP/EUR rate of 1.1630 to 1.1780
Aussie and Kiwi Dollars: Yesterday wasn’t the best of days for the commodity currencies. It started in Asian trade where the AUD was the main mover, falling across the board, particularly against the greenback and the euro. The floods in Queensland and the failure of Gold to hold above the $1420 level saw investors taking profit in their long Aussie positions. GBP/AUD and GBP/NZD rallied from the outset of trading, GBP/AUD getting as high as 1.5545 and GBP/NZD reaching a high of 2.0446 before consolidating their gains for the day; the U.K. mortgage data would have helped the pound, but with it being heavily oversold in the abnormally illiquid markets typical of the festive period this rebound was to be expected to some extent. The downward pressure on commodity prices, with gold, oil and copper down 2% for the day didn’t help the AUD and NZD. GBP/AUD and GBP/NZD open this morning at 1.5530 and 2.0334 respectively.
– We expect a range today in the GBP/AUD rate of 1.5340 to 1.5620
– We expect a range today in the GBP/NZD rate of 2.0240 to 2.0440