USD leads the way on a mixed day for GBP and Euro.

Tom Tong16/Jan/2014Currency Updates

GBP

The recent Sterling Dollar back and forth continued this morning with the pound punching back early on and regaining some of the overnight losses. The dollar however came back strongly after lunch, landing a quick one-two on the back of strong US data releases, before Sterling recovered slightly to reach the bell down only slightly, at -0.2% for the day. Cable suffered further losses overnight. It was a similar trajectory against the Euro, making early headway before dropping back at lunch time. Again, some gains were made back in the afternoon before heading into the Asian session about par.

Although much of Sterling’s volatility over the session was more due to events outside the UK’s control, George Osborne’s late morning speech on Europe would have put further downward pressure on the currency. At a speech to Conservative Eurosceptics in London he warned European leaders that without substantial treaty and structural reform they risked losing the UK in the 2017 referendum.

No remarkable data expected from the UK today.

EUR

Poor German GDP figures showed that the EU’s biggest and healthiest economy might just be feeling strain of its union partners’ troubles. Germany grew just 0.25% in Q4 2013, as strong domestic demand could not make up for a decline in the export market. The Euro was down in early trading against Sterling and the dollar, although it rose again later in the day against the pound. A generally quiet day for the single currency, aside from some Sterling cross volatility, ended with it about level with the pound but down against the dollar, around 0.3%. An overnight rally did see some gains retraced.

German inflation numbers of 1.2% released this morning will likely have an effect on the days play, as we await the ECB’s monthly report. Although in line with consensus the results are still a long way below target and down 0.4% on October, more worrying news for Europe’s leading light. We will also have inflation reports for the EU out later on, an important figure particularly for Mario Draghi and the ECB as they ponder their next move on interest rates. Anything outside of consensus will likely see some volatility.

USD

The US kept up its run of good form this week as excellent data out of the US saw the dollar make large gains against its major partners. By this morning the Dollar was up half a cent on the Euro while cable retraced down a quarter per cent to levels we saw last week. Mortgage applications were up 11.9% for the week, while we saw a huge 12.5 in the manufacturing index for New York State. With the RPI also marginally up nation-wide it has been a very cheering week for dollar buyers downbeat after last Friday’s jobs report, as both equity and currency markets make back Fridays losses in good time.

The icing on the cake came with the Fed’s beige book report – positive rhetoric from businesses, economists and analysts shows the level of confidence in the US this year. The report also gave the impression that the jobs market is healthier than Friday’s figures suggest, adding volume to the calls to disregard last week’s number as an anomaly.

Oodles of data out of the US today, including CPI inflation, weekly jobless claims and local manufacturing surveys, as well as Ben Bernanke’s speech. All are expected to be positive.

RoW

The possible volatility in emerging markets mentioned yesterday appeared almost immediately as South African Rand hit five-year lows against the dollar after a poor construction report. Australian unemployment reports came in as expected, although the employment count was down 22, 000 on last month, sending a currency that is already under severe suppression from the central bank down 1.2% to four-year lows against the dollar.

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Written by Tom Tong

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