Australian Dollar and New Zealand Dollar
The commodity currencies outperformed the USD on Friday, with AUD/USD and NZD/USD demand supported by the increase in risk appetite, and persistent talk of imminent easing measures from China had particular resonance for the currencies of Australia and New Zealand, both of whom are large trading partners of China.
Higher gold and oil prices were also supportive of the higher yielding currencies on the day. AUD/USD was bid up to a high of 1.0473 and NZD/USD traded to a high 0.8181 as USD longs were squeezed hard during a volatile European session.
The commodity dollar strength translated onto the crosses with GBP/AUD declining to a low of 1.5147 from a start at 1.5234 and GBP/NZD fell to 1.9362 from an opening level close to 1.9500.
It has been a slow start to the week for the AUD and NZD this morning, although the Kiwi received some support on the back of better than expected trade data for February which rebounded strongly from a soft figure in January.
GBP/AUD and GBP/NZD open this morning at 1.5151 and 1.9403 respectively.
We expect a range today in the GBP/AUD rate of 1.5020 to 1.5300
We expect a range today in the GBP/NZD rate of 1.9290 to 1.9550
British Pound Sterling / US Dollar
The USD traded with an offered tone on Friday as risk sentiment remained well supported and treasury yields fell.
GBP/USD was able to finish the day around 1.5860 having been as low as 1.5821 on the back of some weaker than expected U.K. mortgage approval data. The pair staged a dramatic bounce higher soon after however, trading to a high of 1.5884 as risk caught a bid before going into the weekend.
It was hard to find a clear catalyst behind FX market movements on Friday, but the prevailing theme on the day was better risk appetite with rumours of an imminent Chinese RRR cut giving risk a leg higher. U.S. data couldn’t lend a helping hand to the greenback on Friday, with new home sales figures coming in at 315k versus expectations of 325k, highlighting the underlying weakness in the domestic housing market, the sector of the U.S. economy that the Fed remains so concerned about.
Economic data from the U.K. is light on the ground this week, the main focus being the final estimate of Q4 GDP which is due on Wednesday. Investors will be anticipating some important U.S. releases over the coming days for more clues on the underlying fundamentals of the economy, with consumer confidence figures, durable goods orders, the final estimate of Q4 GDP, and Chicago PMI all due for release later this week.
Expect risk appetite to continue to dominate movements in GBP/USD today, with the pair opening at 1.5844 this morning.
We expect a range today in the GBP/USD rate of 1.5790 to 1.5920
The single currency squeezed higher against the USD on Friday with better risk appetite and a broadly weak greenback the main drivers of the move higher.
Better than expected French business confidence and Italian retail sales numbers would have supported the single currency on the day, but other factors such as the Chinese RRR cut rumours and chatter that European leaders are seeking to combine two existing rescue funds to prevent contagion of the sovereign debt crisis, were likely more important to the EUR/USD pair on the day.
EUR/GBP ended the day higher, slightly off its intraday high of 0.8364 (1.1956) which was achieved after the release of better than expected French and Italian data and soft U.K. lending data. It is likely that market focus will shift back onto Europe this week, starting today with the release of German IFO numbers which will be key to setting the tone for the single currency at the start of this week.
Later in the week we have German unemployment and retail sales figures, and Spanish and Italian bond auctions will also be worth watching given the rise in peripheral yields that we saw last week. More reports over the weekend that Eurozone leaders are looking to boost the region’s contagion firewall has helped push the single currency higher at the start of trading this week. GBP/EUR opens this morning at 1.1951.
We expect a range today in the GBP/EUR rate of 1.1900 to 1.2030
AUD: No data due
EUR: German IFO Business Climate
GBP: No data due
NZD: No data due
USD: Pending Home Sales, Dallas Fed Manufacturing Activity
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