Publication date: 3 April 2013
Author:?Richard Driver, CaxtonFX
Concerning headlines continue to flow from Cyprus, this time regarding the resignation of the island?s Finance Minister. Elsewhere in the eurozone, the Portuguese government faces its fourth no-confidence vote today, reminding investors of the plethora of issues that the euro faces. On the data front today, we have a significant US employment update ahead of the big monthly report on Friday. Domestically, we have the monthly construction growth update from the UK.
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STERLING/EURO: The pound came under pressure yesterday but the services PMI figure tomorrow will have the final say.
??There was no knee-jerk response to yesterday?s weak manufacturing figure but it certainly weighed on the pound as the session progressed. Clearly the market remains very nervy over the outlook for UK growth. We have the equivalent figure from the construction sector out this morning and this looks hard pushed to ease concerns. Tomorrow?s UK services figure is the big one and these recent losses will be reversed if another firm figure is confirmed.
???1.1740 is an important level, breach of which to the downside would leave this pair fairly vulnerable. For now, this pair trades at ?1.18.
STERLING/US DOLLAR: Data highlights convergence of US and UK growth outlooks.
??There was some disappointment on Monday after the US manufacturing figure only came in to reveal a low level of growth. However, as data from the UK and Europe showed yesterday, growth itself is a rare thing right now and the US is expanding across the board.
??Today?s US labour market update is likely to be upbeat, so this could sustain some further dollar positivity in the near-term. This pair trades at $1.51.
EURO/US DOLLAR: The euro continues to edge lower as the markets turn their attention to tomorrow?s ECB meeting.
??Given the negative developments in the eurozone and the continued deterioration of growth data, many market players will be looking for the ECB to hint at another interest rate cut when it meets tomorrow. However, we suspect Draghi will stand firm, particularly as the alarm bells from the eurozone in recent weeks haven?t caused a genuine crash in the financial markets. This supports the suggestion that the worst of the crisis could well be behind us, notwithstanding the fact major euro shortfalls remain.
??The euro is trading at $1.28 and there is room for another half cent move lower.
STERLING/AUSTRALIAN DOLLAR: This pair fell sharply within its four-week trading range, helped by improved aussie trade balance data.
??The market clearly gave up on levels above 1.46 and sterling fell two cents through a trap door. Last night?s aussie trade balance data for February was much-improved, revealing only a marginal deficit ? the smallest in eight months.
??This pair should get some support from the 1.46 level, which should trigger a bounce.
STERLING/NEW ZEALAND DOLLAR: The kiwi dollar is on the front foot after data confirmed surge in commodity prices.
??NZ milk giant Fonterra?s recent online milk auction saw prices spike to an all-time high, whilst risk appetite returned in style last in Asian stock indices. The NZD is a real front runner in the FX markets at present ? ongoing complaints from NZ officials as to the strength of the currency appear to be falling on deaf ears.
??This pair trades close to 1.79 and it goes without saying that these are outstanding levels at which to sell NZD and buy GBP.?
STERLING/CANADIAN DOLLAR: This pair suffered a sharp decline as commodity currencies lead the way.
??The Canadian dollar had a great day yesterday and it?s hard to believe that last Friday?s IMF report on currency reserves has nothing to do with it. Clearly with questions hanging over the euro, the role of currencies like the CAD in central bank thinking is increasing
??This pair benefited from some support at 1.53 this morning and we should see GBP edge higher from here.
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