Volumes skinny with narrow ranges. Sterling trades higher as the market awaits release of BoE minutes
23/Apr/2014 • Currency Updates•
A subdued session across the markets yesterday – skinny volumes and no real pivots, aside from the Australian dollar which tanked sharply following another set of poor data.
Sterling continues to scuttle up across the board. As of yesterday the sterling trade weighted index is at its highest level since mid-2008. This measures sterling against its most traded currency pairs and is closely followed. Against the greenback we are at 5-year highs and annual highs against the euro.
Naturally at these levels there is possibility of a snap back and the street is split over whether sterling will go higher or begin dipping. Heads swing today to the BoE with the release of the latest minutes. These will show the levels of support for an interest rate hike, previously the BoE have been unanimous in their decision to keep rates at current levels. It will be interesting to see if this remains the same considering the spectacular unemployment levels seen last week which led to the sterling rally. We also have the release of the UK official public sector borrowing figures which could display a slight excess, signs the economy is very strong may nudge the government to again talk over its controversial fiscal austerity programme.
BoE minutes and public sector borrowing set for release at 9.30 GMT.
Skinny trading for the euro yesterday, with most of Europe returning from the Easter holidays. London closed with the euro nudging slightly up against the dollar, however dipping against sterling.
Uncertainty remains over whether the ECB will move towards more monetary stimulus. Traders await Eurozone inflation data which is due to come out on Wednesday, 30th.
Recent weeks have seen Draghi bring the currency into focus and warn that any further strengthening could lead to the ECB using unconventional tools such as asset purchases.
Eurozone PMI figures for the services and manufacturing sectors are set for release at 9.00 GMT.
London closed with the dollar dipping against sterling and the euro.
US March existing home sales beat expectations but still showed a modest decline to 1-1/2 year lows. There was chatter in the market about the dollar looking attractive; the US economic situation looks increasingly rosy following improved US data and earnings, it also appears the public is more willing to spend with retail sales up.
Today will bring the release of US mortgage applications and new home sales, as mortgages have become more expensive, a slight dip is expected for both figures.