United States Dollar: The last trading day of the week saw relatively subdued price action in cable as it ended the day almost unchanged, capped just above the 1.6300 level. The pair saw a minor sell off in the wake of the weaker than expected U.K. Halifax house price data, coming in at -0.9% m/m, versus analysts expectations of -0.5%. The pound continued to be driven by investors’ interest rate expectations and with that in mind the market will be looking to the Bank of England’s interest rate decision on Thursday with great anticipation. The big release for the greenback was the non-farm payrolls report, which showed that US companies added 192,000 jobs last month and the unemployment rate fell to 8.9%. Although this release was relatively positive, coming in at the higher end of analyst expectations, investors were quick to note that the report is unlikely to alter the Federal Reserve’s monetary policy outlook, given that unemployment levels still remain stubbornly high. GBP/USD opens this morning at 1.6257.
– Expected range today in the GBP/USD rate: of 1.6240 to 1.6320
– Expected range today in the GBP/EUR rate: of 1.1620 to 1.1720
– Expected range today in the GBP/AUD rate: of 1.5970 to 1.6110
– Expected range today in the GBP/NZD rate: of 2.2020 to 2.2150
Euro: Friday was another solid day for the 17-nation currency as it continued its move higher on the back of the ECB’s President Trichet’s imminent rate hike rhetoric with EUR/USD managing to break through 1.4000 shortly after the release of the U.S. employment report. The euro continued to gain against the pound as investors noted that the pound has fallen behind the euro in terms of potential rate hikes, and on the day the weaker than expected U.K. house price data certainly supported the euro. Friday saw few meaningful economic data releases from the Euro zone, however ECB officials were on the wires en-masse supporting Trichet’s rate hike message, with ECB member Wellink stating that the central bank may look to “raise rates sooner if inflation pressure is too big”. Amongst all of the bullish chatter President Trichet commented on the recent upward move in the single currency, warning that “disorderly FX movements are negative for the economy”, though traders did seem to ignore this. The euro starts this week under pressure as the ratings agency Moody’s downgrades Greek government bonds from B1 to Ba1. GBP/EUR opens this morning at 1.1667.
Aussie and Kiwi Dollars: GBP/NZD continued to track higher on Friday, moving towards the 2.2100 level, as negative sentiment regarding the economic impact of the Christchurch earthquake continued to weigh heavily on the Kiwi. A report from Bloomberg over the weekend showing that the earthquake may cost NZD 15 billion certainly will not have helped sentiment, and investors are now pricing in a reasonable chance that the Reserve Bank of New Zealand will cut interest rates in their monetary policy announcement later this week. In the absence of any meaningful economic data, the price action in GBP/AUD was relatively quiet, lacking the impetus to make a move higher through the 1.6100 level. GBP/AUD and GBP/NZD open this morning 1.6063 and 2.2109 respectively.
