Category: Daily Look

USD continues steady advance



The overnight session has seen further creeping strength of the dollar, building on the gains seen during Tuesday. The dollar index has touched levels last seen mid-September last year and so far this week, we have also seen EURUSD make fresh lows for the year.

Sterling is now heading for its seventh consecutive week of losses vs. the dollar. Such a run of weekly losses has not been seen since August 2008 in the midst of the global financial crisis when the dollar was rising against pretty much everything. Back then, cable fell 12%, this time it is down just over 3%. Of course, back then was very different times, but the difference does illustrate the lower volatility environment we are currently in.

For today, sterling is going to be keenly watching the minutes to the August MPC meeting. After the Inflation Report, few surprises are likely, but there remains the low probability but high impact scenario of at least one member voting for higher rates, which would certainly cause sterling to reverse at least some of the recent losses as short positions are covered. Elsewhere, the Fed minutes are also released this evening and will watched for signs of any change in tone.

Overnight, we’ve seen some volatility on the Aussie as RBA governor Stevens has given testimony to the Australian parliament. Whilst the currency was initially higher to the 0.9320 area, we’ve seen a pull-back, partially on the dollar strength, but in the background were the Governor’s comments on the currency, where he pointed out that the risk of an Aussie fall had been “materially underestimated” by the market. It was not really a significant change in tone, but was certainly a reminder that the central bank remains sensitive to currency developments and acts as a further warning to those wanting to push the currency higher.

Further reading: Getting to grips with trend following

UK inflation data rocks Sterling

UK inflation data rocks Sterling

Sterling will be closely watching the inflation data today. Last month saw a sharp rise in the headline rate to 1.9%, which was in part owing to the different timing of sales vs. last year. As such, there are expectations for the rate to move lower to 1.8%, with the spread of forecasts from banks

Monitoring Sterling Volatility

Monitoring Sterling Volatility

A calmer tone has emerged in the past few sessions that suggests the second half of the month could prove to be calmer than the first. We can see this in the fall in volatility measures from the highs recorded at the start of August. Equities have also recovered from the late July/early August sell-off

UK Q2 GDP Coming up

UK Q2 GDP Coming up

Stock markets have managed to reverse at least some of the losses seen over the past 3 weeks, despite the headlines regarding a possible return to recession in the Eurozone after yesterday’s disappointing GDP numbers. Once again the focus is on the ECB, but at this point in time, to rely on further monetary stimulus

Sluggish second quarter for the Eurozone

Sluggish second quarter for the Eurozone

The focus is firmly on the health of the Eurozone economy this morning. We’ve already seen numbers from both Germany and France, with data for the Eurozone has a whole (at 09:00 GMT) likely to show that the economy ground to a halt in the second quarter. The German reading showed a 0.2% decline in

Bounce-back risks on  sterling

Bounce-back risks on sterling

The focus switches back to sterling today as the Bank of England presents its August Inflation Report, with labour market data preceding an hour before at 08:30 GMT. Back in June, Governor Carney initiated the sterling rally, having suggested that the market was under-estimating the risk of a rate hike this year, something which was

Dollar snap-back?

Dollar snap-back?

We’ve seen some creeping dollar strength overnight, the main exception being the Aussie which has held above the 0.9250 level for the most part, aided by stronger domestic data showing better than expected business confidence and also house price increases in the second quarter. Whilst we have seen some correction in equities more recently, the

Global Equities Levtiate as Geopolitics Dominate

Global Equities Levtiate as Geopolitics Dominate

Geopolitical wildfires continue to rage throughout the global landscape, though a dampening of some of the immediate risks has financial markets off to a jubilant start to the week, with growth-correlated assets leading the charge higher. Building on the positive developments from last Friday that Russia had cancelled military exercises on the Ukrainian border; new

Dollar enjoys underlying bid

Dollar enjoys underlying bid

One of the main fears last month was that markets were too complacent on the prevailing risks. Volatility measures were at multi-year lows, stock markets continued ever higher with no real corrective activity, with no signs of concern over geo-political events in Russia and beyond. In many ways, it is comforting to see markets taking

Markets clouded by many  uncertainties

Markets clouded by many uncertainties

Mario Draghi did little to surprise the markets yesterday by maintaining quite a consistent message and not announcing anything new or radical.  There was certainly a tinge more of a dovish slant to the press conference, but maybe not as much as had been expected and other than the odd reference to the ABS program