United States Dollar: Weaker than expected UK Services PMI data released yesterday triggered a pound sell off and GBP/USD fell back below 1.6300 to a low of 1.6250. February’s index printed at 52.6 vs. expectations for 53.8. Later on that morning MPC member Bean said that he expected high inflation to persist next year and by more than the Bank of England projection but he also suggested that spending cuts and austerity measures would bring the inflation rate back within target range. US ISM Non-Manufacturing PMI came in close to expectations in the afternoon whilst US Unemployment Claims fell to their lowest level since May 2008 which aided the decline in cable. GBP/USD has recovered off of its lows this morning and opens the London session at 1.6285 ahead of key US Non-Farm Payrolls due this afternoon. Halifax House price data is due from the UK this morning.
– We expect a range today in the GBP/USD rate of 1.6190 to 1.6340
– We expect a range today in the GBP/EUR rate of 1.1610 to 1.1740
– We expect a range today in the GBP/AUD rate of 1.5940 to 1.6120
– We expect a range today in the GBP/NZD rate of 2.1940 to 2.2120
Euro: EUR/USD is now knocking on the door of 1.4000 following Trichets accompanying statement to the ECB interest rate decision. He said that the bank may hike interest rates next month to counter rising inflation. In fact he said that strong vigilance is warranted and went on to say that this means that there may be a rate hike next month. He went on to say that it would not be appropriate to expect a series of rate hikes or a big rate hike. The market has now fully priced in a rate hike for April anyway. Towards the end of the day yesterday the IMF came on the wires and said that the interest rate on Irish IMF loans will fall below membership quota changes for 2008 which further supported the euro. EUR/USD has rallied from 1.3840 this time yesterday to 1.3955. It means the euro is stronger across the board and GBP/EUR has fallen below the 1.1700 level again. It trades at 1.1670 this morning, close to the low of yesterday.
Aussie and Kiwi Dollars: After making an attempt at recovery yesterday NZD/USD has fallen back under the .7400 figure again. The kiwi is clearly still suffering as a result of last week’s earthquake, something that will continue to weigh on the currency for a good part of this year. The IMF is likely to cut the 2011 growth forecast for NZ as a result of the quake according to an IMF spokeswoman. The currency is still reeling on the back of Prime Minister John Keys comments earlier in the week too. NZD/USD opens at .7375 and this has meant that GBP/NZD has broken through 2.2000 for the first time in almost six months. In contrast AUD/USD has traded a fairly narrow range over the last 24 hours. There was no local data released overnight. It opens today at 1.0125. GBP/AUD trades at 1.6050, unchanged from yesterday.
