Euro rises across the board. Dollar hampered by soft data.

Tom Tong19/Feb/2014Currency Updates

GBP

London closed with the pound again slipping slightly against the euro and a touch against the dollar. The slight fall stemmed from a pincer of lower than anticipated inflation figures and further profit taking following this weeks strong sterling rally. In other news, the city again woke up to the scent of fear and loathing as 3 ex-Barclays traders were officially charged following the 18-month SFO investigation into Libor manipulation, the game of cops and robbers is ongoing with nobody yet jailed and worldwide investigations continue.

The good news is that yesterday’s drop in inflation mean fears of a earlier interest rate hike have for the meantime been quelled. Inflation eased below the BoE target of 2% for the first time in 4 years. CPI rose 1.9%, shadowing Decembers 2%. Ice Cool Carney will not be melting over a lack of heat up in inflation and is likely still chuffed that inflation levels remain within a whisker of the official target. Fresh data today will provide a greater insight into the current state of the economy.

This is the latest in a carousel of good news for the UK with the market still surprised with the recent weeks tumbling rate of unemployment and a revision to the upside of both BoE and IMF growth forecasts for 2014. CPI is now called to hover around 2% for the rest of the year and nudge into 2015. The public upset of falling inflation not leading to a rise in living standards continues with average annual wage gains sat around 1.5% Ultimately, unless prices dip considerably the average worker is still going to be hard pressed to realise any tangible benefit.

Big data out today with the release of BoE minutes. ILO unemployment rate, claimant count change and average earnings.

EUR

London closed with the euro seeing fair gains against sterling and knocking the dollar to 7-week lows, taking leverage from weak data out of both the US and UK.

London closed with the euro marking 7-week highs against the greenback and punching through resistance levels. Asian trading saw further support for the euro against its most traded pairs. However no real notable swings. Predictably the euro gained support against sterling following softer than expected UK inflation data and clawed back some of its losses from the recent sterling bull run.

Interestingly the euro barely reacted to a mixed German ZEW survey.The euro gained ground across the board and hit a 6 week high against the Swedish krona after consumer prices in Sweden fell more than expected leading to revised talk of a interest rate cut.

Data releases of note today include- euro construction output and Greek current account figures.

USD

Poor innings for the dollar yesterday as poor data out of the US led to the dollar being hit hard against its basket of most traded pairs. London closed with the dollar losing ground against the euro. However, we saw a slight uptick against the pound. This can be attributed to the previous sterling rally.

New York manufacturing and US housing adding to the upset yesterday, after a spectacular 2013 the year of the dog has bit the US quite hard with a succession of weak data out of the US. US home builder confidence suffered its largest one month drop this February, peaking concerns that the recent poor run of economic data can not be blamed solely on the savage weather. The New York business conditions index fell to 4.48 from 12.51 the previous month. This missed the market call of 9 and led to further dollar weakness.

A more macro view was yesterday’s Treasury figures showing overseas investors sold almost $120bln of US assets in December. This amounts to $214bln over the course of last year. In contrast the eurozone attracted inflows into stocks of 111bln euros. The figures may go to prove a more risk on attitude among investors, although the worry will be that with falling liquidity the US is in danger of losing momentum.

Eyes will be scoping the FED again today with the much anticipated release of the FOMC minutes. Also data out of the construction industry and PPI for food and energy.

Print

Written by Tom Tong

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