After a good start to the month (strong employment report), the dollar has settled into a steadier tone so far during July. On the cross rates, the most interesting move has been on EURGBP, with further lows for the year achieved yesterday as the tone to sterling remains ever resilient, despite recent gains. The focus remains on sterling today with the release of production data. Headline production is seen rising 0.3% (from 0.2% in the previous month) with a firmer number likely to give further impetus to sterling. Cable has pulled back a touch from what were marked as fairly over-bought levels on the charts, but still remains comfortably above the 1.70 level.
There are a couple of other interesting things to point out on the FX scene. Firstly, the Aussie has recovered nearly half of the ground lost last week on the back of comments from RBA Governor Stevens, putting the over-valuation of the Aussie in a slightly less favourable light. The moves we’ve seen since then underline the resilience of the Australian currency, with comments from Stevens acting as a cap on the currency around the 0.9450/0.9500 area. More specific comments, as we saw in December last year, are needed if the currency is to be pushed lower on a more permanent basis. The other thing to keep an eye on will be central bank minutes from both the Bank of England and Fed tomorrow, both of which are becoming more important (especially for the UK) as the debate on the timing of a first rate increase becomes more balanced.