United States Dollar: Owing to concerns over the debt of peripheral European countries and developing tensions between North and South Korea risk was sold last week and the US dollar strengthened across the board. The trend was intensified on Friday amongst thin markets (with a US Thanksgiving holiday on Thursday). GBP/USD slipped below the 1.5700 figure on Friday, breaking stops and eventually trading to a low of 1.5561. There was no UK data released on Friday of any note. GBP/USD is slightly off of its low this morning however following news of the Irish bail-out plan over the weekend (more on this in the Euro wrap) as it helps to mildly improve risk sentiment. GBP/USD opens this morning at 1.5641 as London markets react to the news.
– We expect a range today in the GBP/USD rate of 1.5500 to 1.5640
Euro: As risk sentiment waned throughout last week the Euro continued to get dumped. It eventually fell to a low of 1.3185 as Irish and other peripheral European debt issues remained the focus of markets worldwide. Things have changed over the weekend however with news of a €85 billion bail-out agreement for Ireland. €35 billion will go to the Irish banking sector whilst €50 billion will go towards the government to aid spending where necessary. It will be interesting to see how London and European markets react to the news today and what this will mean for spreads on other peripheral European debt. So far the reaction risk wise has been positive and EUR/USD opens at 1.3285. In other news German Prelim CPI inflation data was released on Friday. It came in much as expected at 0.1% and was largely ignored by a market more focused on developments in Ireland. GBP/EUR pushed to a high of 1.1870 as the Euro continued to get battered. It is back off this morning though owing to the news of the Irish bail-out and opens at 1.1760.
– We expect a range today in the GBP/EUR rate of 1.1710 to 1.1820
Aussie and Kiwi Dollars: The US dollar has reversed its losses from last week following an improvement in risk sentiment early on this morning, owing largely to the Irish bail-out. After briefly dipping below the .9600 level overnight AUD/USD has recovered to open the London session at .9680. NZD/USD has fared much the same. It has pushed up from .7450 and trades at .7510 currently. Also supportive of the Kiwi was the release of slightly better than expected local data. Business confidence continues to improve as a net 33% of businesses confirmed that they expected better times ahead whilst the NZ trade balance narrowed to -319 million vs. expectations for -416 million. Both GBP/AUD and GBP/NZD are lower compared to this time on Friday and open at 1.6110 and 2.0740 respectively.
– We expect a range today in the GBP/AUD rate of 1.6010 to 1.6240
– We expect a range today in the GBP/NZD rate of 2.0620 to 2.0840
