United States Dollar: “New Years Eve saw razor thin trading conditions as month-end, quarter-end, and year-end fixing flows drove the dollar broadly lower. GBP/USD opened the day at 1.5440 and after a couple of failed attempts, it managed to successfully breach the 1.5500 level, moving as high as 1.5664 before ending the year at 1.5611. Impetus for the move higher was found in a report from Nationwide Building Society showed that the average cost of a U.K. home rose 0.4% from November to December, the first rise in prices in 7 months, leaving GBP/USD to record a decline for 2010 of 3.1%. In reality the reason the pound was the strongest performer on Friday was more likely down to investors having to cover overextended short GBP positions on EUR/GBP and GBP/AUD, amongst others. With most major centres closed on Monday, trading was quiet. The greenback was able to gain against most of its major counterparts after data showed that manufacturing in the U.S. rose to a 7 month high, another sign that the economy is on the right track. Traders will be turning their attention to the Non Farm Payrolls on Friday for more clues on the state of the U.S. economy. GBP/USD opens this morning at 1.5490. ”
– We expect a range today in the GBP/USD rate of 1.5420 to 1.5580
Euro: “EUR/USD finished the year in very choppy fashion at 1.3388, having been the worst performing major currency against the greenback in 2010. The euro-dollar relationship this year saw investors shifting their gaze from Europe’s ever present debt problems to the economic issues in the U.S., starting with Greece, which resulting in heavy euro selling; then the viewpoint moved back to the Fed and their “QE2” policies, resulting in dollar selling, and finally ending the year with more euro negativity as the problems in Ireland unfolded. After a volatile week of trading characterised by one off flows in highly illiquid markets, GBP/EUR finishes the year up 3.4% at 1.1660. The pound was able to find some support from the better than expected Nationwide housing data. To keep things in perspective, the pound and euro were the two worst performing currencies in 2010 as measured by Bloomberg Correlation-Weighted Currency Indexes, which compare the currencies of the 10 most developed nations. On Friday evening, in his annual address, French President Nicolas Sarkozy reaffirmed his support for the single currency, saying that giving it up would be “madness”. The New Year also saw Estonia becoming the 17th member of the single currency. Trading conditions were still not back to normality on Monday. GBP/EUR fell below the 1.1600 level, a move that could well have been based on month/year end euro demand that wasn’t completed on Friday. The euro was also bolstered by data showing that European manufacturing expanded faster than expected in December. GBP/EUR opens this morning at 1.1614. ”
– We expect a range today in the GBP/EUR rate of 1.1580 to 1.1700
Aussie and Kiwi Dollars: “On Friday AUD/USD managed to break through the well protected 1.0200 area to reach another post-float (28-year) high of 1.0255 before eventually consolidating and finishing the year at 1.0231. After the Japanese yen, the Australian dollar was the second best performer against the greenback in 2010, climbing 14% over the year. Over the same period the Kiwi dollar was able to advance 7.9%, with both antipodean currencies supported by record high commodity prices and the investor search for higher yielding assets. GBP/AUD finished the year at 1.5259 and GBP/NZD at 2.0009, posting yearly declines of 15.54% and 10.49% respectively. Monday saw AUD/USD fall back below the 1.0200 area, NZD/AUD suffered also, after data showed China’s manufacturing growth slowed in December. It is also likely that the floods in Queensland have been weighing on the AUD to some extent. GBP/AUD and GBP/NZD open today at 1.5365 and 2.0120 respectively. ”
– We expect a range today in the GBP/AUD rate of 1.5280 to 1.5400
– We expect a range today in the GBP/NZD rate of 2.0100 to 2.0180
