G10 in tight ranges as focus turns to Wall Street

Tom Tong08/Apr/2014Currency Updates

GBP

The pound carried on where it left off against the euro last week, trading very tightly within a 0.1% range. Against the dollar it showed a little more life, taking advantage of the equity sell off to gain half a cent over the day, reversing last week’s losses immediately.

Sterling’s two month retrace from the spectacular highs of early 2014 can be put down more to the strength of its pairs than any UK weakness, but a weaker currency is likely to be preferable from a central bank point of view. Although Mark Carney hasn’t been as explicit as his European counterpart, we can imagine that is slightly devalued currency won’t be his main concern.

There was no data from the UK yesterday, and indeed it looks set to be a relatively sparse week. The only interest will come from Thursday’s ECB meeting and interest rate decision, although nowadays these rarely cause any shock waves in the market.

Data today includes industrial and manufacturing production for Feb and a 3-month GDP estimate for March.

EUR

The only real movement from the single currency yesterday came against the dollar as it too took advantage of US equity woes to record a 0.3% uptick on the greenback.
Yesterday we saw a small increase in industrial production for Germany, coming in 0.1% above expectation each for MoM and YoY, at 0.4% and 4.8%. These figures, however, are a decrease on January’s figures, which is probably the reason for the subdued market reaction. Again, it is important to take longer term trends into account above just headline figures. Good news from Spain however, with industrial output increasing by 2.8% in Feb, almost double January’s figures.
Not an awful lot to look forward to this week, with German inflation and the ECB’s monthly report the only possible causes of market movement.
Today we have data from France, including trade balance, import and export numbers for Feb.

USD

The dollar dropped off slightly from the pound and the euro yesterday, losing around half a percent.

Focus yesterday was firmly on Wall Street as stock markets fell across the board, led by a consortium of tech firms. Fears that the recent splurge of tech IPOs has led to over-valuation in the market encouraged the sell off, which is the worst performance of the NASDAQ 100 for 100 days.

Of the G3 currencies the dollar probably has the most interesting week, with FOMC minutes, initial and continuing jobless claims and inflation reports set for release on consecutive days. Specifically today we have business optimism for March, the Redbook index and FOMC member Kocherlakota’s speech. Rebooks are notoriously volatile and hard to predict, but a reading over 2% YoY would be seen as positive.

RoW

India began the 6 week voting process to elect the new Parliament yesterday. Indian stocks as well as rupee investors will be relatively tense during the period, as the outcome could well have a big effect on the Indian economy in the future.

Elsewhere Nigeria’s re-valued economy over took South Africa as Africa’s largest, jumping to a revised $510 billion dollars, while the Bank of Japan kept interest rates steady at world leading lows of 0.1%.

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Written by Tom Tong

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