United States Dollar: The USD sold off across the board overnight and this morning on the back of fresh talk of stimulatory measures from the Federal Reserve. Risk appetite has increased proportionally as investors look to park funds in assets with higher yield, as cheaper cash becomes available. The dollar index, a trade weighted index against a basket of currencies, fell to a ten month low on the back of policy expectations. Data out this afternoon from the US is likely to show a growth in unemployment, and a widening of the trade deficit which will add gravitas to the case for more quantitative easing in the States. GBP/USD is up on the news, rallying from 1.5900 levels early this morning to a high of 1.6067 a few moments ago (09:00 GMT). It is likely that this fresh round of dollar selling will continue, but the extent to which other currencies will appreciate is likely to be uncertain, adding to short term volatility.
– We expect a range today in the GBP/USD rate of 1.5960 to 1.6100
Euro: The recent expectation of further stimulus measures from the US has boosted risk sentiment and increased demand for the Euro accordingly. EUR/USD broke 1.4000 with ease and rallied to levels beyond 1.4120 on the back of new long positions and unwinding (stop loss triggers) of short positions. Relative strength of the Euro at the moment is driving it higher against a range of currencies, and against the Pound the Euro continues to strengthen. GBP/EUR managed to recover slightly from lows around 1.1340 in the early hours of this morning to levels just shy of 1.1400 where we are at the moment. There’s little out in the way of data but Bundesbank President Weber speaks at 11:00 GMT this morning.
– We expect a range today in the GBP/EUR rate of 1.1320 to 1.1450
Aussie and Kiwi Dollars: The Aussie also rallied to record levels this morning on the back of improved risk sentiment. AUD/USD rose to 0.9994, six cents off parity against the US dollar before retreating to levels around 0.9960 where we reside at present. Volatility in this currency particularly is likely to remain elevated in the coming days and weeks as speculators take new positions in the high yielder. We have little out in the way of data until next week now, so movement is likely to be driven by sentiment rather than any updates in Australian fundamentals. In New Zealand the Kiwi also benefitted from a risk turnaround and rallied to 0.7640 before heading lower to levels around 0.7610 this morning. There’s been little in the way of news flows regarding recent policy talks in NZ but that’s likely as a result of focus on movements in the Aussie and the US dollar respectively.
– We expect a range today in the GBP/AUD rate of 1.6000 to 1.6180
– We expect a range today in the GBP/NZD rate of 2.1000 to 2.1200
Data Releases:
- AUD: No data of note
- EUR: BUBA President Weber Speaks
- GBP: No data of note
- NZD: No data of note
- USD: PPI / Trade Balance / Unemployment Claims
