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Angus Campbell

Dollar correction continues

We start a new month with many countries observing a Bank Holiday either today or next Monday so we are likely to see a couple of quiet sessions, in particular since there is no nonfarm payroll release today, which happens next Friday instead. We saw little in the way of overnight action from the Asian markets and today sees manufacturing survey data from the UK and US, as well as the US Michigan Consumer Sentiment, which could cause some movement for sterling and the dollar. As we look back at ...

Angus Campbell

US slowdown destabilises markets

Yesterday’s US GDP data confirmed the divergence between the UK and US, which has now been building for some months and we saw GBPUSD crescendo higher. It is now not far from recording a new 2015 high, but we are still some way off the 200 day moving average, which sits around the 1.5700 level, so the jury is still out as to whether this sharp move to the upside in the past few weeks is a reversal of the downward trend that commenced last July. Naturally there was also some risk taken off the ...

Angus Campbell

Dollar to be tested by FOMC

Ahead of the FOMC it’s the turn of the US to release GDP data today which is expected to see the Q1 annualised rate decline from 2.2% to 1.1%. This evidences the drive of GBPUSD’s recent strength and yesterday’s poor US consumer confidence data allowed “cable” to forget the weaker than expected UK GDP data and push on higher above the 1.5300 level, to an almost two month high. So, at this month’s FOMC meeting the Fed has had to consider a very poor nonfarm payroll number earlier in April, weak ...

Angus Campbell

Divergence between UK and US

The economic calendar is busy today with UK GDP data this morning being a focus and one of the reasons for the recent strength in GBPUSD. There’s been a shift in the paradigm as US data has been showing signs of an economy running out of puff, whilst UK data continues to show a recovery that maintains its momentum, so with UK GDP released today and US GDP tomorrow we will continue to see evidence of this divergence. The UK’s Q1 number is due to come in at 0.5%, with Y on Y at 2.6% whilst US Q1 ...

Angus Campbell

Sterling a standout as election nears

Last week the pound put in a stellar performance against the dollar as GBPUSD hit a five week high against the tide of uncertainty ahead of the UK General Election in just ten days time. We have looked at how the political stalemate (see here) is likely to cap sterling gains, however this move higher has caught many off guard with a breakout above 1.5000 leading to a push to the mid 1.5100 area. Last week the market was reminded by the BOE that they will be raising rates, even if it is not ...

Simon Smith

The dollar impact on earnings

With the US in the depths of the earnings seasons, it's noticable once again the extent to which the dollar has been impacting some of the biggest US companies. The dollar index was up nearly 9% during Q1, following on from the substantial gains of the second half of 2014. The recent Fed minutes showed the extent to which the US currency is featuring in the Fed's thinking. As we've said before, the extent of the dollar rally seen since the middle of last year is unprecedented in the era of ...

Simon Smith

The importance of yields

The standout in yesterday’s trading was sterling, where the minutes to the latest MPC meeting pushed home the point that the next move in rates is going to be up, even if they gave little away in terms of timing. We pointed out the near-term potential for sterling which has come to fruition, but the currency is coming under some pressure this morning and is seen back below the 1.50 level on cable. We have 2 weeks to go before the general election and sterling is likely to become increasingly ...

Simon Smith

Potential for sterling

The stand-out in overnight trade has been the rise in the Aussie, which gained some comfort from the better than expected print on CPI data. The trimmed and weighted measures were above expectations at 2.3% and 2.4% respectively. Yesterday's minutes from the RBA again re-iterated the view that further easing "may be appropriate" and the longer held view that further depreciation was likely given recent trends in commodity prices. The Aussie moved towards the 0.7780 level as a result, which puts ...

Angus Campbell

Greece decides state or IMF

After a week of dollar weakness some tentative buyers are returning leading to some reversals of the very near term trends amongst the majors. AUDUSD has retraced from above the 0.7800 level and sits around 0.7700 this morning, GBPUSD has pulled back from 1.5000 to trade at 1.4855 and EURUSD is back from above 1.0800 to 1.0680 at the time of writing. All three majors face their own risks when it comes to a weak outlook with a central bank remaining vocal in wanting to see its currency ...

Angus Campbell

Dollar pause

The US dollar struggled last week and market participants are increasingly challenging the ability of the greenback to continue the upward trend that it commenced last summer. The dollar index has appreciated over 20% in the past ten months and the recent weakness in US economic data is one of the main reasons for investors having second thoughts about the dollar bull market. Expectations for the first rate hike have been pushed back considerably with the number looking for June to mark the ...

Angus Campbell

Euro’s turn to defy gravity

The euro has held up very strongly in the face of mounting concerns that Greece will soon have to leave the Eurozone. The IMF have been very vocal in their concerns that Greece is on the cusp of either being late with one of its up and coming repayments or missing it altogether, with the next €200 due on 1st May (a Bank Holiday for most), followed by another €770m on 12th May. This will be averted if reform negotiations are concluded by 24th April and bailout funds are released, but few in ...

Angus Campbell

Aussie defies gravity

The big stand out from last night was the Aussie which has spiked on the back of a much unexpected decline in unemployment. AUDUSD is now back in the mid 0.7700 area marking a two week high as the Australian economy created more than double the amount of jobs expected in March and February’s rise was revised upwards almost threefold. The Aussie has also benefitted from strength in commodities as crude prices have also spiked on the back of a drop in US production and oil stocks. A number of ...

Angus Campbell

Concerns rise over Chinese economic slowdown

Chinese GDP data overnight has fallen to its lowest level for six years and whilst it is in line with expectations a little risk aversion has set into the markets overnight and this morning. It is the industrial production and retail sales numbers that have worried investors causing Asian stocks to decline during their session and the dollar has perked up recouping some of yesterday’s losses. Whilst many Asian stocks have been rallying for months on the prospect of further stimulus from central ...

Angus Campbell

Grexit fears mount

After a quiet start to the week where the dollar just paused for breath, the single currency is coming under renewed pressure this morning, in particular against the Yen as EURJPY has hit a near two year low overnight. Reports that Greece is preparing to default on its up and coming IMF loan repayments in May and June unless a deal is struck by the end of this month have done little to attract buyers of the euro and we’re unlikely to see any upside for some time given that QE has only just got ...

Angus Campbell

Sterling testing multi-year lows as Election looms

The economic calendar is very quiet today which gives us a chance to reflect on a week gone by that saw a recovery in dollar strength. It was sterling and the euro that were the main losers with sterling being a stand out as GBPUSD has overnight fallen to its lowest level since June 2010, a new low since the last General Election back in May 2010 and it is likely that with less than a month to go to the next General Election, sterling will remain under pressure against the dollar. Trading at ...

Simon Smith

Tighter ranges on majors

We are seeing daily ranges in major FX pairs move lower as the dollar continues in what can best be described as a corrective phase. The 10 day (simple) average range of EURUSD has moved to near the 6-month average of 1.1 cents (or 110 pips). It peaked over 2 cents in the wake of last month’s Fed announcement. USDJPY is much below the similar 6 months average of the 10 day range. This is largely a reflection of the change in FX drivers we’ve seen, with the many easings of policy that were being ...