United States Dollar: Wednesday became the ninth day in a row that sterling strengthened against the U.S. dollar, as the December jobless claims figures from the U.K. came in at their lowest level in 21 months, and the number of people receiving unemployment benefits was shown to have declined by 4.1k. Although cable did initially move above the 1.6000 level after the data release, it pared most of the move higher during the later stages of the day. It’s fair to say that U.K. inflation woes are still supporting the pound, with investors looking to the possibility that the Bank of England may have to increase its benchmark rate sooner than anticipated. Solid EUR/GBP buying is still hanging on GBP/USD to some extent, stifling any breaks above the 1.6100 level. Traders will be turning their attention to the U.K. December Retail Sales figure released on Friday for more clues on the economic situation. GBP/USD starts the day at 1.5911.
– We expect a range today in the GBP/USD rate of 1.5850 to 1.6010
Euro: It was another relatively good day for the single currency, moving to a fresh monthly high above the 1.3500 level against the greenback, albeit not for very long. The euro was able to rally off the back of another well received Euro Zone bond sale, with Portugal auctioning 750 billion euro in 12-month bills with 4.029% yield, versus 5.281% in December. Sovereign debt issues have been somewhat subdued of late, but are never too far from the surface and Wednesday was no exception, after an economic adviser to the German government made comments in an interview that Greece may not be able to deal with its debt obligations, possibly leading to default. On the day, the 17-nation currency was also supported by comments from ECB’S Weber who said that Germany has a self sustaining economic upturn and statements from various rating agencies who have given the EFSF first issuance program an “AAA” rating. Sterling had another tough day against the euro; although the labour report from the U.K. was mostly positive, it did show that youth unemployment had increased and that pay growth lagged the national rate of inflation, which would have dampened the view that the Bank of England may have to look to raise rates sooner rather than later. GBP/EUR opens this morning at 1.1837.
– We expect a range today in the GBP/EUR rate of 1.1780 to 1.1890
Aussie and Kiwi Dollars: During the Asian session on Wednesday we saw the release of Australian Consumer Confidence data, which showed a decline of 5.7% in January, the largest fall in seven months. This decline in expectations shouldn’t have come as too much of a surprise given the much dampened economic outlook after the flooding in Queensland, which is likely to mean that the RBA will delay any further rate hikes until much later in 2011. Broad dollar weakness and a general “risk on” attitude saw the parity level regained in the AUD/USD pair, rallying as high as 1.0077 before consolidating lower as commodities and equities declined towards the end of the North American session. The positive U.K. jobless claims figures saw sterling continue to move higher against the commodity currencies, with GBP/NZD rallying towards the 2.0800 level towards the end of the U.S. session. GBP/AUD was firm on the day, but unable to break convincingly above 1.6100, as the post Christmas rally looks to be running out of steam. GBP/AUD and GBP/NZD open this morning at 1.6038 and 2.0879 respectively.
– We expect a range today in the GBP/AUD rate of 1.5930 to 1.6080
– We expect a range today in the GBP/NZD rate of 2.0790 to 2.0950
