United States Dollar: Mid morning during the European session GBP/USD was down to 1.5425 from 1.5500 (North America close, Wednesday) with a UK clearing bank as a notable seller of the pair. In terms of data, which was U.S. heavy, we had the Chicago PMI which came in at the highest level in 12 years, jobless claims came in at the lowest level since July 2008, and pending home sales showed that number of contracts to buy previously owned homes in the U.S. rose last month for the fourth time in five months. The trio of data releases is a good indication that the U.S. economy is heading into the New Year in good shape. The dollar did rally somewhat after the news, but not as much as expected given the positivity and poor liquidity certainly didn’t help matters. The pound wasn’t helped by the release of yet further soft data regarding the state of the U.K. housing market and subsequently we saw GBP/USD go as low as 1.5366. It opens today at 1.5480.
– We expect a range today in the GBP/USD rate of 1.5450 to 1.5540
Euro: GBP/EUR was down at a 7 week low of 1.1583 after a report released from the Land Registry indicated that house prices fell 0.6% in November and a Bloomberg survey indicated that house prices will continue to decline next year. There was the usual month-end euro buying for the UK’s EU budget contribution which saw the euro rise against the pound. This euro buying subsequently supported EUR/USD. Price movements were certainly exacerbated in very thin markets and lack of meaningful economic data has certainly left the pound vulnerable to fluctuations. The main drivers for the pairings have not been down to anything fundamental, but rather end of year position squaring and seasonal factors. Italian Business confidence came in at 103 from 101.7 in November, which underlines the confidence of business leaders in the region in the face of the European debt crisis, which in turn is helping to supporting the single currency. Chancellor Angela Merkel also vowed to defend the euro as part of her New Years speech, which was emailed in advance to reporters. In stark contrast to this optimism, we saw the Centre for Economics and Business Research come out and say that the euro only has a one in five chance of surviving in its current form over the next 10 years. GBP/EUR opens this morning at 1.1595.
– We expect a range today in the GBP/EUR rate of 1.1530 to 1.1650
Aussie and Kiwi Dollars: After posting an all-time high of 1.0197 the AUD/USD slipped to a low of 1.0117, after the lower Chinese PMI figure weighed on risk appetite somewhat and some profit taking took hold. The 1.0200 level in AUD/USD is still yet to be breached, which is not surprising given the solid protection that waits around those levels. The Kiwi also fared well, touching a near five week high against the greenback on renewed optimism on the state of the global recovery, following the strong U.S. data. We end 2010 on an upbeat note in regard to the global economic situation and this has been supportive of the commodity currencies. This morning GBP/AUD and GBP/NZD open at 1.5209 and 2.0020 respectively.
– We expect a range today in the GBP/AUD rate of 1.5140 to 1.5240
– We expect a range today in the GBP/NZD rate of 1.9960 to 2.0100
