United States Dollar: The dollar strengthened yesterday as a result of good economic US data, rising tensions in Asia, and growing worries in the Eurozone which prompted safe haven buying. Third quarter GDP estimates came in higher than expected, showing an annualized growth rate of 2.5% versus an expected rate of 2.3%. FOMC minutes released later in the US afternoon alluded to slower growth next year, with growth forecasts being revised down from between 3.5-4.2% to 3-3.6%, putting downward pressure on global growth forecasts. Analysts have noted that consumer spending has been resilient, and this weekend see’s the start of the Christmas shopping season after Thanksgiving tomorrow. GBP/USD fell from levels around 1.5950 at the start of the day yesterday, to a low of 1.5758 overnight. We open slightly stronger this morning at 1.5790, having dropped from 1.5835 on London open. Today we have GDP revision figures out in the UK, followed by a string of data out in the US.
– We expect a range today in the GBP/USD rate of 1.5730 to 1.5880
Euro: Spreads above German Bunds widened further for the peripheral European countries, as creditworthiness concerns grew and investors demanded higher yields for lending to the likes of Spain, Ireland and Portugal. Spain now pays 233 basis points more than Germany, to borrow over a 10 year period. Whilst this is relatively low compared to the likes of Greece and Ireland, Spain’s central bank governor has stated that the contagion has “made itself felt”, drawing attention to higher funding costs. Some analysts believe that given the current size of the Stability Funds (and mechanism), Spain would be too big to bail out, and would even put the EU Fund’s AAA credit rating at risk. EUR/USD fell from levels around 1.3600 yesterday to a low of 1.3350 this morning. The Euro is likely to remain under pressure whilst such worries are still prominent in the headlines, and whilst spreads on sovereign debt continue to widen. Today we have industrial orders out from the EU.
– We expect a range today in the GBP/EUR rate of 1.1760 to 1.1880
Aussie and Kiwi Dollars: Whilst sovereign debt worries continue to plague the Eurozone, risk is very much off the table, and currencies like the Aussie and Kiwi will suffer as a result. In Australia construction figures came in lower than expected, putting further downward pressure on Aussie, which fell from 0.9880 levels yesterday down to a low of 0.9708 before recovering to levels above 0.9800. We open this morning at 0.9770. In New Zealand the Kiwi was also dragged lower by EU debt worries, falling from levels around 0.7720 to a low of 0.7580. We open slightly higher this morning at 0.7590. Tomorrow morning we have capital expenditure figures out of the UK.
– We expect a range today in the GBP/AUD rate of 1.6050 to 1.6250
– We expect a range today in the GBP/NZD rate of 2.0675 to 2.0850
Data Releases:
AUD: Private Capital Expenditure
EUR: Industrial Orders / Bundesbank President Weber Speaks
GBP: Revised GDP Figures / MPC member speaks
NZD: No data of note
USD: Durable Goods / Unemployment Claims / New Home Sales
