United States Dollar: GBP/USD traded quietly during the Asian session on Tuesday, moving in a tight range between 1.5547/1.5588. A report from the British Retail Consortium showed that U.K. retail spending expanded at a slower pace in December, after November showed 2.8% expansion. This was the first drop in retail sales in 8 months. Although the data came in weaker than anticipated, this wouldn’t have come as a huge surprise to many investors given the severe weather conditions that the U.K. experienced during December. As a consequence, sterling came under some temporary pressure, but Central Bank cable buying gave impetus for a move higher and later in the North American session the pair was able to break through the 1.5600 level convincingly, reaching a high for the day of 1.5639 before retreating back downwards in consolidation, but ending the day on a firm footing around the 1.5620 level. Its fair to say that sterling is still receiving support on renewed U.K. interest rate hike hopes and continued EUR/GBP selling was certainly a help for GBP/USD on the day. GBP/USD opens this morning at 1.5618.
– We expect a range today in the GBP/USD rate of 1.5530 to 1.5675
Euro: Developments within the Eurozone were once again the main focus of the markets on Tuesday and early trading saw a volatile EUR/USD, moving between 1.2912/92, falling initially with AUD/USD but then spiking sharply higher, along with EUR/JPY, after the announcement that Japan would be buying Euro bonds to support the European Financial Stability Facility (EFSF). However the spike was short lived after Japanese Finance Minister Noda announced that the bond purchases would be financed using existing FX reserves. During the European session we saw some well received Treasury Bill auctions from Italy and Greece, as well as the ECB buying periphery bonds. This saw the spread of periphery bonds over German government bonds narrow which then triggered a rebound in EUR/USD. Traders in the U.S. would have also noted the Japanese Finance Ministers overnight comments regarding Eurozone bond purchases, lending the euro some support in U.S. trading. The general price action of the EUR/USD pair for the rest of the day was choppy, bouncing between the 1.2900-1.3000 levels. Sterling continued to do well against the euro, moving to the mid 1.20’s, however it lacked the momentum to move through the 1.2100 level. GBP/EUR opens this morning at 1.2038.
– We expect a range today in the GBP/EUR rate of 1.1940 to 1.2100
Aussie and Kiwi Dollars: The AUD fell heavily in Asian trade on Tuesday. Data out of Australia showed that the Trade Balance surplus narrowed unexpectedly in November and whilst it didn’t deviate too far from the expected result, with the Queensland flooding at the front of investors’ minds the data took on a new context, as worries about the disruption to the areas coal exports persist in the wake of the devastation created by the floods. An article from the Brisbane Times highlighting evacuation preparations for residents in the area for their worst flooding in 118 years continued to weigh on the AUD during early European trading. A decent rally in commodities during the U.S. session helped prompt some short covering, taking AUD/USD higher. GBP/AUD spent most of the day consolidating its recent gains around the 1.5800 level and GBP/NZD was mostly range bound, moving between the 2.0500-2.0560 area. GBP/AUD and GBP/NZD open this morning at 1.5804 and 2.0522 respectively.
– We expect a range today in the GBP/AUD rate of 1.5750 to 1.5870
– We expect a range today in the GBP/NZD rate of 2.0450 to 2.0580
