United States Dollar: It was no surprise that the Bank of England left interest rates and QE on hold yesterday. Cable was sold off immediately on the news and dropped to a low of 1.6010 from 1.6050/60. UK manufacturing data, released pre-BoE decision disappointed too showing that output declined by 0.1% vs. expectations for a 0.5% rise. This also heaped downward pressure on the pound. Later on in the day though and as London came to a close sterling then saw some good demand and GBP/USD rallied back above the 1.6100 figure. It hasn”t lasted long though and with risk coming off following the surprise announcement by Egyptian President Mubarak to stay in power last night the USD is stronger across the board. GBP/USD opens at 1.6060 as a result. UK PPI and US trade balance is due today.
– Expected range today in the GBP/USD: rate of 1.5980 to 1.6120
– Expected range today in the GBP/EUR: rate of 1.1720 to 1.1800
– Expected range today in the GBP/AUD: rate of 1.5890 to 1.6040
– Expected range today in the GBP/NZD: rate of 2.0860 to 2.0990
Euro: Peripheral spreads in Europe widened yesterday and following better than expected US unemployment claims data EUR/USD came under pressure for most of the day. The US figures showed that jobless claims fell to a two year low. News from Egypt has further undermined the currency as investors shun riskier assets and pile into the USD. Riskier assets include stocks; we saw Asian stocks fall more than 1% overnight as tensions grew in Egypt. EUR/USD has fallen from 1.3680 to 1.3570 over the last 24 hours and there is perhaps more room for USD strength heading in to the end of the week. The Euro is weaker against the pound too. GBP/EUR opens up at 1.1835 this morning.
Aussie and Kiwi Dollars: With risk off, both AUD/USD and NZD/USD have slipped overnight. AUD/USD has fallen back below parity and NZD/USD has slipped from .7680 to open the London session at .7600. RBA Governor Stevens was also speaking last night in his opening statement to the House of Representatives Standing Committee on Economics. He was much less hawkish than he has been recently and said that it was reasonable to expect that there will be no more rate hikes for some time (in large part because of the Queensland flood destruction). As a result both GBP/AUD and GBP/NZD are higher this morning and open at 1.6090 and 2.1130 respectively.
