Simon Smith

Holding tight ranges but better US data

We've seen some better US data this afternoon, but the dollar has held a tight range for the most part, with some weakness seen against the yen and Aussie. But what we are seeing is better data on housing continuing, with Existing Home sales this afternoon coming through and rising a firmer than expected 2.4%. For what it's worth, Philly Fed data was also firmer than expected, rising at the fastest pace since early 2011. For now, it seems that markets have settled down, waiting for Friday and ...

Simon Smith

Two MPC members vote for UK rate rise

Sterling up around 30 pips initially after minutes to Aug MPC minutes show two members voting for higher rates. Once again, the currency faces another conflicting message on the path of interest rates. Those voting for higher rates focusing in part taking a tactical perspective, saying it would allow the MPC to deliver on a gradual normalisation of policy. On the other side, the majority saw that there was insufficient evidence of inflationary pressures to justify an increase. Cable has ...

Simon Smith

Sterling lower after softer CPI

Cable down around 45 pips initially after weaker than expected CPI data, which showed headline falling to 1.6%, from 1.9%. Expectation was for 1.8%. Much of the volatility seen over the past two months down to volatility in clothing and footwear prices and the timing of sales, which were seemingly earlier last year (impacting the YoY measures). The expectation did seem on the high side given this, but the skew of forecasts was to to the downside. This was probably largely factored in by the ...

Simon Smith

Eurozone grinds to a halt

After the weaker GDP data from Germany (-0.2%) and France (flat) earlier today, no surprise to see Eurozone data coming out flat. This follows on from four quarters of positive growth prior to Q2. Euro little changed as result was anticipated after earlier data.

Simon Smith

GBP weaker on Inflation Report

The initial reaction to the Bank of England Inflation Report has been for sterling to weaken, with cable moving from 1.68 to 1.6735. The headlines have shown that the Bank still expects inflation to remain below target over the forecast period and this is main reason why sterling has fallen. The Bank acknowledges that slack in the economy has been erased but is greater than previously thought owing to developments in the labour market. Market now more doubtful of 2014 rate increase, in ...

Simon Smith

Weaker earnings data push sterling lower

Sterling down around 20 pips after weaker than expected earnings data in the labour market report. Earnings wer down 0.2% on 3M YoY measure, ex-bonus measure was up 0.6% (vs. 0.7% previously). Headline impacted by bonus payment timing issues. Focus on Inflation Report in 1 hours time, given this will be first since Carney's hint in June that markets were under-estimating the risk of a rate increase this year.

Angus Campbell

BOE no change to rates

The Bank of England has kept its benchmark rate on hold at 0.5% which was as expected so the reaction from sterling has been muted.  Without any formal statement following today's meeting it no surprise that GBPUSD remains around the 1.6850 level.  For sterling it's next week's BOE Inflation Report that's going to be the major focus going forward and then on 20th August we will learn how the MPC voted today.

Angus Campbell

Mixed PMIs across Europe and UK

European services PMI data has been mixed but the overall figure for the Eurozone was less than expectations, even the composite figure was lower at 53.8 (expected 54.0).  An increase in last month, but being lower than expectations has given those unrelenting euro bears an excuse to sell the single currency pushing EURUSD down to the 1.3400 level this morning.  For the UK by contrast its PMI data bucked the recent trend with the services element coming in higher at 59.1 (expected 57.9) and the ...

Angus Campbell

US GDP for Q2 erases Q1 decline

GDP for the US in Q2 jumped as high as 4%, far more than the expected 3% and has totally wiped out the surprise decline in Q1 which was originally reported to be -2.9% but has been revised up to -2.1%.  This compliments the good consumer confidence data yesterday and has led to further strength for the US dollar.  USDJPY was testing a month high around 102.20 level and has now smashed through that meanwhile EURUSD, GBPUSD and AUDUSD are all seeing a move to the downside.  The daily chart for ...

Angus Campbell

US consumer defies geopolitical tension

There were concerns that the consumer confidence figure release today was going to be knocked by the recent build up of geopolitical tensions in Ukraine and the Middle East, but this certainly wasn't the case.  Stock markets and risk assets continue to defy gravity and it looks like the US economy will have rebounded from its shock fall in GDP last month strongly - we will see tomorrow.  With the labour market continuing to improve it's little surprise to see a cheerier US consumer and the ...

Simon Smith

UK GDP in line

Sterling holding relatively steady after latest GDP data recorded 0.8% increase, in line with expectations. Cable 1.6990 after some initial weakness.

Simon Smith

EUR lower on weak IFO reading

The euro has reversed the initial early strength after weaker than expected Ifo data, which showed the headline reading fall to 108.0, from 109.7.  Both expectations and current conditions balances fell. EURUSD is currently down to 1.3450.

Simon Smith

Creeping towards higher rates in the UK?

The latest minutes to the MPC meeting showed a more balanced picture and with the vote remaining at 9-0 for keeping rates on hold, sterling has softened from the levels that were prevailing ahead of the release. Note though that the currency was moving higher early on during the morning session, so perhaps had run away a little in the expectation of something more bullish. The minutes did state that some members saw a reduced risk of a rate rise derailing the recovery. On the other side though, ...

Simon Smith

EUR breaking lower

Having been moribund for the past few session, the euro has broke lower this morning, below 1.35 and through the previous low of the month at 1.3491.  This has happened ahead of the US CPI data due later today. As we pointed out in the daily today, EURUSD is increasingly being driven by US rate expectations as the ECB's hands are seen as being tied by the fact that most policy option have been exhausted. There are no particular catalysts being cited for this latest move, but it is perhaps ...

Simon Smith

Volatility split

We're again witnessing a divergence in volatility between FX and other markets as events in the Ukraine take on a new dimension.  On equities, the VIX (measure of expected future volatility) has spiked to 3 month highs. A similar measure for FX (CVIX from DB) has declined to new lows for the year. Why is FX so sanguine about it all? Three reasons. Firstly, in case you had not noticed, the old "risk on, risk off" dynamics are a thing of the past, having been ditched well over a year ago. ...

Simon Smith

Dollar weakness on Yellen

The dollar has fallen on the initial comments from Fed Chair Yellen during her semi-annual testimony in Washington today.  Her opening statement stressed that slack remained in the labour market and again emphasised that "a high degree  of monetary policy accommodation remains appropriate".  That said, the dollar remains above the levels seen just ahead of the last employment report, by just under 0.4% on the dollar index.