Market trades in tight ranges
20/May/2014 • Currency Updates•
Currency markets barely reached first gear yesterday as the week got off to a slow start, with money markets flat across the board. Sterling was no exception, trading barely outside a 0.2% range against major pairs.
With no data out yesterday investors stayed out of the market, priming themselves for a bigger day today. We have UK inflation both CPI and PPI, predicted to show a more upbeat 1.7% annualised rate. After Mark Carney’s weekend warning of a UK housing bubble, an interesting side note to tomorrow’s proceedings will be house price inflation, set to come in at a rather large 10.7%. Double digit inflation in any sector warrants some caution.
PPI, which contrary to CPI includes house prices in its measure, is predicted to show 2.6%, which gives an indication of the scale of influence the housing market has on UK consumption.
Away from currency markets, Pfizer had its latest 69bn offer for AstraZeneca rejected. If their promise of not going down the hostile route is held, this should signal the end of the long running saga.
The Eurozone provided the only data of the day, with EU wide construction decreasing by 0.6% MoM and falling to 5.2% YoY. Even this excitement failed to provide any stimulus to markets; the euro traded similarly to the pound over the session.
Some important data due out today, particularly German inflation and Italian industrial. For Germany, a country which has an innate fear of low inflation, it is important they avoid being dragged down with the rest of the EU to dangerous low inflation territory.
With a lack of data coming this week from the EU, the single currency will be at the mercy of its pairs. We could still see some marked volatility.
The overnight sessions followed the pattern of the day, with little-to-no movement. The greenback bounced around resistance levels against major pairs.
The dollar had the best of it last week, and will be looking to cement those gains this week. A few weeks of consistent dollar strength would send a strong signal that the greenback is back on track.
No data yesterday and only red book indices out today. Tomorrow will be a bigger day, with minutes from the last FOMC meeting to be released in conjunction with a speech by Janet Yellen. Positive sentiment from both events will send the dollar up.