United States Dollar: Despite weak UK public sector finance data and a soft CBI industrial trends survey GBP/USD rose to a 3-month high of 1.5804 yesterday. The catalyst for the move higher in cable was a rampant EUR/USD pair, with the single currency rallying hard on the back of renewed investor optimism that the European Central Bank will soon intervene to support Spanish and Italian borrowing costs. Today’s FOMC minutes will be the main focus for the market amidst another lackluster day for global economic data and investors will be hoping that the release provides some clarity on how likely it is that the Fed will extend their QE program at the central bank’s September meeting. Yesterday’s price action was positive for cable with the pair closing above its 200-day moving average at 1.5715 and also another key level at 1.5780, which from a technical standpoint makes gains towards the 1.6000 level more likely. From a fundamental perspective a continuation of better sentiment towards the euro should mean further gains for cable. GBP/USD opens this morning at 1.5780.
We expect a range today in the GBP/USD rate of 1.5700 to 1.5825
Euro: The euro was the best performing G10 currency yesterday, rising to a 7-week high against the USD and a 2-week high versus the pound. Continuing speculation surrounding possible European Central Bank bond market intervention and chatter regarding favourable concessions on bailout terms for Greece were both factors that lent support to the common currency on the day. This better sentiment saw Spanish 10-year yields continue to peel away from their recent highs and most tellingly Spanish and Italian Credit Default Swaps (the cost of insuring against a sovereign default) fell to their lowest levels since the start of April. The “no news is good news” stance is likely to continue to benefit the euro today, especially with the economic calendar being as light as it is. GBP/EUR will continue to take its cue from EUR/USD today. GBP/EUR opens this morning at 1.2671.
We expect a range today in the GBP/EUR rate of 1.2620 to 1.2750
Aussie and Kiwi Dollars: The AUD/USD and NZD/USD pairs followed the move higher in risk yesterday as better sentiment towards Europe saw investors load up on riskier assets, in particular the S&P 500 rose to 4-year highs. Continued speculation surrounding the possibility of European periphery bond market intervention by the European Central Bank saw strong short covering in the EUR/AUD and EUR/NZD crosses which in turn dragged the GBP/antipodean crosses higher, with GBP/AUD finishing the day on its highs at 1.5066 and GBP/NZD closing at 1.9482. News out of Europe and broad risk sentiment will continue to be the drivers behind the commodity dollars today. GBP/AUD and GBP/NZD open this morning at 1.5102 and 1.9501 respectively.
We expect a range today in the GBP/AUD rate of 1.5020 to 1.5200
We expect a range today in the GBP/NZD rate of 1.9430 to 1.9580
AUD: No data due
EUR: No data due
GBP: No data due
NZD: No data due
USD: Existing Home Sales, FOMC Meeting Minutes
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