– Expected range today in the GBP/USD rate of 1.6020 to 1.6210
– Expected range today in the GBP/EUR rate of 1.1650 to 1.1750
– Expected range today in the GBP/AUD rate of 1.5920 to 1.6060
– Expected range today in the GBP/NZD rate of 2.0640 to 2.0780
United States Dollar: It was a solid day for sterling against the U.S. Dollar yesterday as GBP/USD rose to fresh high for the year after the U.K. Manufacturing PMI Index came in at a record high of 62.0, from 58.7 in December. This combined with the bullish forecast from the NIESR of three 25 bps rate hikes this year saw cable shoot higher to 1.6141. The market did overlook some other less than stellar data from the U.K. however, namely December mortgage approvals shown to be growing at the slowest pace since March 2009. Against a backdrop of much improved risk appetite on the back of strong manufacturing figures across the board, including the strongest U.S. manufacturing data in seven years, and easing of worries regarding the unrest in Egypt, USD weakness was seen across the board and subsequently GBP/USD was able to move to another high of 1.6178 early this morning before consolidating lower on profit taking. Investors will be looking to the U.K. Construction Sector PMI report today for further signs of optimism. GBP/USD opens this morning at 1.6163.
Euro: The 17-nation currency rose to a near 3 month high against the greenback yesterday after the release of some strong data for the region, with the Euro Zone Manufacturing PMI figure coming in at 57.3, from 57.1 in December; the German unemployment rate declining from 7.5% to 7.4%, and the number of people claiming unemployment benefits in Germany falling to the lowest figure since 1992. We also saw the release of French Producer Prices data for December, which were shown to have risen strongly, and will have only added to the speculation that the ECB may have to look to tighten monetary policy sooner than expected in the face of rising inflationary pressures. As protests in Egypt passed peacefully and a more optimistic outlook on the global recovery prevailed after the strong manufacturing data out of the US, Europe and U.K. riskier assets were embraced and the greenback shunned, leaving EUR/USD to break through the 1.3800 level. Price action in the EUR/GBP pair was more subdued, but the pair did weaken as sterling rose strongly against the greenback throughout the day. The market will be turning its attention to the Portuguese bond auction that is due to take place today for any signs of faltering demand. GBP/EUR opens this morning at 1.1701.
Aussie and Kiwi Dollars: Given the shift in risk appetite it shouldn’t come as any surprise that the commodity currencies were the strongest performing currencies on Tuesday, both rising sharply against the USD. Large scale AUD short covering saw AUD/USD move as high as 1.0150 as the price of Copper rallied to a record high and the Dow Jones Industrial Average rallied to its strongest level since summer 2008. The move higher in the AUD was made all the more remarkable as news emerged that a category 5 cyclone was bearing down on the already flood battered Queensland. The GBP/AUD and GBP/NZD rates moved lower throughout Tuesday as both the Aussie and Kiwi continued to find bids. GBP/AUD and GBP/NZD open this morning at 1.5984 and 2.0718 respectively.
Data Releases:
- AUD: Trade Balance, Building Approvals
- EUR: Euro Zone Producer Price Index
- GBP: Construction PMI
- NZD: Unemployment Rate
- USD: ADP Employment Report
