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Daily Forex Commentary
Friday, 30 July 2010 - Market Commentary:: United States Dollar: With little out on the data side of things volatility remained subdued yesterday and currencies traded within a tight range. In the US unemployment claims came in as expected at 457,000, a slight drop on the previous weekly reading of 468,000. Today may be a little better in terms of data releases which provide momentum as we have US GDP figures out at 13:30 GMT (expectation of a 1.1% increases Q on Q). In the UK a couple of positive news flows from the corporate sector drove positive sentiment higher in equities, supporting demand for the Pound. British Airways have commented that despite recent losses due to unforeseen events such as strike action and volcanic ash the business was gaining ground. HSBC, listed in London, also hinted at further investment abroad, saying it’s likely to drive business in Russia over the coming years. On the macro-economic side Nationwide house price data came in lower than expected, showing a fall in house prices of 0.5%. Credit constraint in the UK, whilst not serious at present, is likely to dampen demand and weigh on growth prospects in the medium to long term. GBP/USD traded as high as 1.5662 before selling off to levels around 1.5630 where we open this morning.- We expect a range today in the GBP/USD rate of 1.5550 to 1.5680 :: Euro: The Euro seems to be hanging on for dear life at the moment and has passed this week relatively unscathed. Despite numerous press articles highlighting the immense funding costs of Southern European states the Euro hovered around the 1.3000 mark against the dollar and the 1.1950 mark against the Pound. To put funding costs in perspective, and to understand how mammoth the task ahead for countries like Spain, Greece and Ireland, these three countries alone must roll over (when debt expires) up to 337bn Euros worth of debt will need to be found. Currently this is being met by the ECB’s supportive measures, but these won’t last forever. Risks to the downside remain, and many are asking when, not if, it will happen. There’s not much in the way of data out from the EU today, but we have unemployment figures out at 10:00. EUR/USD traded up from 1.2980 to a high of 1.3106. We open at 1.3050 this morning. - We expect a range today in the GBP/EUR rate of 1.1850 to 1.2100 :: Aussie and Kiwi Dollars: With volatility being low demand for the high yielders has rocketed, supporting both the Aussie and the Kiwi throughout this week. Despite these recent gains the usual stories are appearing in the press this morning, questioning where the high yielders will head in the coming months. Chinese manufacturing growth slowed for a third month, igniting fears that this may be a new trend in consumption, in a country that has been the driver of demand in the region for a number of years. Investors may be overlooking the short term impact of recent budgetary measures introduced by the Chinese government, which have subsequently been reversed (as a result of worse than expected growth figures). Home loan restrictions were introduced at the beginning of spring in an attempt to cool the housing market, but when officials saw figures dropping (which was the aim of the restrictions), lending was once again relaxed. Clearly this will impact the outlook for growth in the Antipodes, but at the moment the yield pick up is far too attractive (in a non-volatile market) for people to ignore. AUD/USD rallied from 0.8922 to 0.9042 before retreating to 0.8990 where we open. NZD/USD traded up to levels above 0.7280 but gave back gains and fell to 0.7210. . - We expect a range today in the GBP/AUD rate of 1.7250 to 1.7500 - We expect a range today in the GBP/NZD rate of 2.1550 to 2.1800 :: Data Releases:
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