Britain Looks Brighter

Data/Event Risks

• USD: Initial claims and durable goods orders are due out at 12:30 GMT, while the corporate earnings season is in full swing. The last set of claims and durables figures were weak – we could see a minor upside surprise on both today, which would weigh slightly on the dollar.
• EUR: Little in the way of fresh news for Europe today. In the UK, Q3 GDP is expected to show a rise of 0.6% QoQ; anything higher will probably give sterling a further lift in the short term. Update: The economy grew by 1% according to the initial report.

Idea of the Day

Plenty of FX themes out there currently that are working well for us, including yen weakness, Aussie outperformance against the majors and CAD weakness. Also, the pound might deliver a further positive surprise short term, as King’s speech seemed to rule out near-term QE.

Latest FX News

• USD: Tentative day for risk appetite helped the dollar early, amidst poor economic news out of Europe. However, the dollar index again failed to break 80 and we saw strong buying of the pound, Aussie and the euro over the course of the day.
• EUR: Wobbled badly for a time yesterday in response to poor manufacturing PMIs and weak German Ifo before recovering as the day progressed. 1.2920 held, so the bulls were temporarily placated. Still in a narrow 1.29-1.32 range.
• GBP: Those who were short Sterling assuming the BoE would opt for more QE next month scrambled for cover after King’s speech highlighted some encouraging recent economic developments. Short-term, the pound might surprise further on the topside against other majors.
• AUD: Given fragile risk appetite, global economic concerns and lower commodity prices, the performance of the Aussie has been Teflonesque. Into the teeth of a howling financial gale, the AUD remains resilient. The bears are fighting the tape on the AUD, while the bulls are winning.
• GOLD: Still looks susceptible to a near- term decline to around critical support down near the USD 1,660 level. Downtrend of lower highs and lower lows seems entrenched and momentum is poor.