United States Dollar: Sterling was able to gain 0.5% against the USD during the Asian session on Tuesday, helped by a broad greenback sell off ahead of the start U.S. earnings season and some solid U.K. economic data, with Nationwide Building Society reporting an unexpected improvement in its December Consumer Confidence figures and there was also an improvement in the December RICS House Price Balance figure. The start of the European session saw cable marching steadily higher as traders eagerly awaited the U.K. December CPI figure and it didn’t disappoint, rising 3.7% on an annualised basis, and a record 1% on a month by month basis. This is exactly what the cable bulls were looking for and GBP/USD shot through the 1.6000 level with ease, reaching 1.6059 before consolidating lower after a round of profit taking. The CPI figure, which now stands at an eight month high, prompted renewed speculation that the Bank of England will need to raise the benchmark interest rate in order to remain proactive in the face of rising inflation and saw cable rise as much as 175 points in the London session. The ongoing alleviation of Euro Zone debt concerns also helped the pound on the day. This morning investors will be looking to the U.K. December Jobless Claims Report for more clues on the state of the economic recovery. GBP/USD opens this morning at 1.6012
– We expect a range today in the GBP/USD rate of 1.5900 to 1.6085
Euro: The Euro continued its winning streak against most of its major counterparts on Tuesday, reaching a one month high against the U.S. dollar off the back of renewed risk appetite and continued speculation that the Euro Zone Finance Ministers meeting would reach an agreement over the EFSF. It turned out that the meeting ended with little consensus; it would appear that the officials are in little hurry to change the size and terms of the EFSF given that recent Euro bond auctions have been attracting decent demand (yesterday saw Spain managing to shift 5.5 billion euros worth of government debt at much lower yields than previous and there was even market chatter that Portugal has sufficient liquidity to cancel a bond auction next week) and other countries have been stepping up to offer support – the latest example of this coming from the Spanish newspaper, El Pais, which covered a story that Russia’s Sovereign Wealth Fund are considering buying Spanish debt (though this was later refuted by the Russian Finance Minister). The main piece of economic data that investors were looking to was the German ZEW survey, which was certainly supportive of the 17-nation currency, showing that investor confidence rose to a 6 month high in January. Despite the stellar U.K. CPI number sterling was unable to take much ground against the single currency as better sentiment for the euro continued to fuel short covering in the market. GBP/EUR opens this morning at 1.1896
– We expect a range today in the GBP/EUR rate of 1.1840 to 1.1950
Aussie and Kiwi Dollars: Tuesday was another better day for the commodity currencies, with the AUD gaining for a second day against the U.S. dollar as commodities and equities traded higher and better risk appetite took hold, with Euro Zone debt worries continuing to ease. The New Zealand Dollar traded at a near two week high against the greenback as higher food prices in Asia lead investors to speculate that this will help boost New Zealand’s exports. Tuesday saw sterling continue its post Christmas rally against the commodity currencies, with GBP/AUD and GBP/NZD reaching highs for the day of 1.6079 and 2.0796. The pairs open the day at 1.5935 and 2.0662 respectively.
– We expect a range today in the GBP/AUD rate of 1.5870 to 1.6075
– We expect a range today in the GBP/NZD rate of 2.0600 to 2.0740
