USD broadly down. Minor EUR gains due to light volumes as the market awaits macro data later in week.

Tom Tong27/Nov/2013Currency Updates

GBP

Good times keep rolling for the UK, thus sterling continues to trade at solid levels, supported again from flowing solid UK data. Sterling rose against the dollar although closed a whisker down on the euro as the currency claws back gains following the lows hit post ECB rate cut. Asian trading giving little to shout about with the major pairs floating around resistance levels.

London opened with UK bulls enjoying more positive data, a survey released overnight showed that British service sector firms are hiring new staff at the fastest rate for 6 years. Monday revealed mortgage approvals are up 33% year on year. Unemployment and the wider economy look incredibly encouraging. Unemployment is sat at 7.6% and the claimant count is at its lowest level since ’97. The housing market is hitting breakneck speed, a rainforest of cranes hang over the city, and the South East is further littered with new builds. Right now the question on everybody’s lips is what the growth means for monetary policy and when an interest rate cut is on the cards.

Carney stepped onto the stage and quickly faced a barrage of questions over BoE monetary policy. Again he stressed that 7% unemployment levels are a guideline and if he feels the time is not right he may shy away from implementing an interest rate change. To some degree he also bared his claws, Carney pushed back against MPs who have been grumbling over confusing forward guidance stoking confusion amongst the government and business owners. Carney dismissed this as a “total failure of logic” he also went further and criticised the Office for National Statistics, who have recently changed their barometers for investment spending accounting for inflation. Carney feels this is misleading.

The market now eagerly awaits second quarter GDP set for release at 9.30 GMT. Service index and business investment are also set for release. Doubtless an eventful morning in store.

EUR

No data out of the eurozone gave little cause for pivot’s in trading yesterday. However, gains were still realised as the market attempts to nudge the euro back to normal levels. London closed with the euro up against both the greenback and pound. Dollar gains continued over Asian trading. However, sterling gains pulled back and London opens with the cross fairly flat. Overall the euro is still trading in the shadow of record highs hit at the start of the quarter. Bullish pressure remains as the euro inches higher on daily trading, however hints of chatter that euro gains may be overextended. Yesterday the euro also took leverage of a poor day for the dollar as investors dropped US T-bills and hot money rushed elsewhere. In other news Germany finally sealed agreements for the formation of a coalition government.

Trading volumes yesterday were relatively light. Presently the market is waiting for extensive euro data due later in the week prior to putting in sizable positions. The same situation is playing out with both the greenback and sterling with euro pivots possible from both internal and external data releases. Excluding this week, for the rest of the year, there will be minimal data out of G7 countries. Thus this week will be key for market sentiment. The market focus on the eurozone will slant towards growth and inflation. The market is crying out for concise evidence that the eurozone can splutter back into forms of acceptable growth, eliminating the threat of deflation and flipping unemployment up.

Data out of the eurozone today includes – French consumer confidence and Spanish retail sales.

USD

The dollar dipped broadly yesterday as lower US T-bill yields led to a rush of hot money elsewhere. Bullish bets on the greenback were curtailed which flipped up the euro. London closed with the dollar down against both sterling and the euro.

The dollar index dipped to weekly lows. Naturally, volumes are skinny as the lead up to Thanksgiving sees things wind down. Consumer confidence further kicked the greenback, unexpectedly we saw a slip to lows last seen in April. Consumer confidence is often surprising. US investors will be hoping this is just a minor move offside. The majority are calling for a record spending festive period which would quickly spin confidence. In all the market is fairly unconcerned as historically there is little translation between consumer confidence and wider economic activity.

The FED pantomime continues on a daily basis with increasingly officials hinting they are looking for a taper on QE. Key employment data will be unveiled on Friday which is likely to again whip up a frenzy of chatter over what this means for the taper timescale. The Fed will be hoping for a high number as they are likely to jump to action upon unemployment hitting 6.5%

Data out of the US today includes – continuing jobless claims and initial jobless claims we also have mortgage applications.

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Written by Tom Tong

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