Category: Daily Look

Sterling succumbs



The break back below the 1.70 level on cable yesterday reflected the extent of the dollar recovery seen during July, but also the more balanced view being taken towards the possibility of higher UK rates this year.  Weaker than expected retail sales also put downward pressure on the UK currency early on during yesterday’s session.  The focus this morning will be GDP data in the UK, seen rising 0.8%in the first reading of Q2 data at 08:30 GMT. Firmer numbers could give sterling the required lift back above the 1.70 level, but this could struggle to be sustained in the face of a continually firmer dollar.  Also in focus early on will be the IFO data at 08:00 GMT.  The headline index has fallen over the past couple of months and is expected to do so once again, from109.7 to 109.4.

In the wider picture, there are still concerns regarding the potential impact of sanctions on Russia from Europe which have yet to be played out.  As we mentioned yesterday, sterling could prove to be the more vulnerable currency should broader sanctions be implemented. Otherwise, the concern will be with energy and the impact of higher prices.  The dominance of the dollar over the past week could leave some risk of profit taking into the weekend, the kiwi and the Swissie having the greater upside potential in this scenario.

Further reading:

UK GDP 0.8% as expected – GBP/USD edges higher

IFO Business Climate falls to 108 – EUR/USD follows

Aussie is the center of attention

Aussie is the center of attention

The dollar continues to assert itself, rising for 7 of the past 10 sessions on the dollar index, but it’s by no means universal.  The Aussie is the main exception, having risen nearly 0,5% vs. the dollar over the past two weeks. The overnight activity here has seen a brief push above the 0.9450 area,

US dollar gaining strength

US dollar gaining strength

So far this month (and quarter) there has been a more dominant trend towards dollar strength.  It’s happening around 6 months later than anticipated, but nevertheless it is emerging.  Earlier in the month, this was coming on the back of interest rates moves working in the dollar’s favour (2Y market rates), but we are also

Dollar sensitivity

Dollar sensitivity

The bigger risk events for currency markets fall into the latter half of the week, meaning that for now majors are constrained to relatively tight ranges with little impetus to breakout either side. The most notable move overnight has been with the Aussie. There were some fears that the RBA Governor Stevens could be more

Why FX volatility remains low

Why FX volatility remains low

The crisis in the Ukraine and the wider pressure being put upon Russia over the weekend is the main point of focus for markets at the start of the week. So far, the impact on FX markets has not been major or sustained, with EURUSD constrained to a 30 pip range for the most part

Ukraine On The Membrane

Ukraine On The Membrane

Geopolitical risks are weighing on market sentiment this morning, after the downing of a Malaysian Airlines flight over Ukraine yesterday. With the tragedy likely to raise tensions between Russia and the West, traders are entering the weekend in defensive positions. Stock indices are broadly down, while crude oil and the Japanese yen are seeing aggressive

Tensions in Ukraine and the Middle East shape investor sentiment

Tensions in Ukraine and the Middle East shape investor sentiment

Geopolitical tensions have come to the fore once again and investors are shunning risk assets.  Classic moves into the Yen, gold and dollar were the theme of yesterday’s session and once again questions are being raised about the sustainability of the equity market strength with the rally now looking a little long in the tooth. This morning

US jobs data a focus going  forward

US jobs data a focus going forward

An element of risk off sentiment has knocked the equity markets overnight and is causing headwinds for indices this morning as the US ramps up sanctions against Russia by targeting individual firms.  The dollar however is not acting as its usual safe haven as it contemplates its next move having appreciated throughout the week, especially

Yellen gives dollar a helping hand

Yellen gives dollar a helping hand

Yesterday and overnight saw a little pick up in volatility as a number of events stirred traders into action.  UK inflation data was much higher than expected causing a spike in GBPUSD back above 1.7100 and EURGBP to plunge back towards 0.7900, then Yellen did her best to maintain her dovish stance on the US

Markets await Yellen’s two day testimony

Markets await Yellen’s two day testimony

Becalmed markets are just showing a few signs of life this morning with many dollar bulls expecting today to mark the start of the dollar’s very widely expected recovery. Janet Yellen will be making her first ever two day Humphrey Hawkins Testimony and the market will be listening carefully to see if her usual dovish