USD continues to rise, Carney again hints at quicker IR rise

Claire Hogarth24/Jul/2014Currency Updates

GBP

London closed with sterling dipping a touch across the board, however the Asian session has seen a retracement and sterling remains well supported.

Carney spoke in Glasgow and the so called “unreliable boyfriend” gave sterling a Glasgow kiss; in what is becoming a Groundhog Day scenario the Governor again alluded to the BoE being primed to raise IR sooner than expected. Specifically he said- “the economy is starting to head back to normal and as it does the bank rate will need to rise in order to achieve the inflation target. He also voiced concerns that if the rise is too soon it might hit the recovery if households cut back spending instead of getting in choppy waters with their mortgage lenders. This is underpinned by real wages failing to rise in tandem with the recovery.

Retail sales are set for release this morning and expected flat following the high levels seen last month, market focus remains on UK GDP figures set for release tomorrow with 0.8% called.

EUR

London closed with the euro again dipping across the board.

The greenback has been trending to the upside against the euro for the past week and this looks set to continue. Yesterday saw the dollar tip to an 8 month high against the euro as worries over tougher sanctions on Russia and their potential impact on fragile Eurozone growth weigh on the currency.

EUR/USD has broken some key resistance levels but we are yet to see a convincing follow though. Further escalations of tensions between Russia and Ukraine could weigh further on the euro if fresh sanctions are enforced. Europe is directly exposed to Russia by trade – Germany in particular hence the euro pressure.

The French Manufacturing PMI data came in flat this morning, Spanish unemployment was better coming in at 24.47% beating calls of 25.90%. Later will see the release of Q2 Market manufacturing PMI for the Eurozone.

USD

The dollar continues to put in a decent shift across the board as traders look more than happy to push the dollar up, interestingly the currency is moving in tandem with the stock market which continues to push to fresh highs.

The greenback is trading at 8 month highs against the euro taking leverage from a risk off sentiment stemming from wider geopolitical uncertainty. Right now the dollar is really being driven on pure market sentiment alone, next week could see it pushed from the release of the latest Fed minutes.

Traders will be scoping to see if a recent run of strong employment and inflation data changes the outlook of Fed members. Last month’s monster payroll report and another month of inflation hovering around 2% could lead to us seeing something a little different from the Fed.

Bundles of data out of the US today – initial jobless claims, continual jobless claims, manufacturing PMI and new home sales.

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Written by Claire Hogarth

Marketing Executive at Ebury. English Literature graduate from the University of York and a motivated professional.