It was a very quiet session yesterday ahead of today’s Independence Day celebrations in the US. Sterling is trading a little flat as tomorrow’s quantitative easing call from the Bank of England approaches. The QE move has been priced in but any sterling upside may have to wait until after the meeting.
Today’s session brings the all-important UK services sector growth figure, which needs to be positive in light of yesterday’s dire UK construction sector figure. From the eurozone, we have a retail sales figure.
STERLING/EURO: Sterling traded sideways yesterday as the markets lay in wait for this week’s risk events.
• Yesterday’s awful UK construction sector figure was bad news for the UK economy, while the LIBOR scandal that is surrounding Barclays and probably more banks to come is not really helping pro-GBP sentiment. Data from the UK services sector is likely to reveal a slight slowdown but at least this part of the economy will remain in positive growth territory.
• Sterling is trading sideways around €1.2450 and we expect further range-bound trading ahead of tomorrow’s decisions from the BoE and the ECB.
STERLING/US DOLLAR: This pair remains range-bound ahead of a meeting between Monti and Merkel.
• We saw further gains across the global stock markets yesterday but the dollar refuses to cede any more ground to sterling at these levels. Yesterday’s US factory orders data bucked the downtrend seen in US data of late to show some decent growth. However, the market seems happy to stand on the sidelines before responding to this week’s central bank activity and US non-farm payrolls.
• Sterling has lost a little ground this morning and is trading at $1.5650, risks remain to the downside.
EURO/US DOLLAR: The euro pared back once again from the $1.27 level, as weak EU and US data boosts demand for the US dollar.
• Italian PM Monti and German Chancellor Merkel will meet today and there may be some room for agreement, with the former having stated recently that his pro-growth emphasis needn’t come at the expense of budgetary discipline. News was less encouraging from France yesterday, with growth forecasts for this year slashed to 0.3%.
• Services data from Italy and the eurozone as a whole has confirmed that the region is firmly in negative growth. The euro is trading down at $1.2580.
STERLING/AUSTRALIAN DOLLAR: The aussie continued its positive run thanks to some positive Australian retail sales data.
• Sterling lost further ground against the AUD last night as aussie retail sales data exceeded expectations, as did a gauge of the aussie services sector. Sentiment is pretty positive towards the aussie dollar at present, as its economy is looking remarkably healthy. Positive Asian equities continue to provide support for the aussie as well.
• Sterling is trading down at fresh lows of 1.5250 and further losses are likely to come this week.
STERLING/NEW ZEALAND DOLLAR: With the BoE and ECB looking to ease monetary policy, the kiwi dollar should perform pretty positively this week.
• The kiwi dollar should provide an attractive alternative in light of monetary easing from the BoE and the ECB this week. The RBNZ is showing no real appetite to cut interest rates from their current level of 2.50%.
• We expect sterling to remain under pressure against the kiwi dollar, but for now it trades at 1.9450.
STERLING/CANADIAN DOLLAR: Sterling continues to lose ground against the Canadian dollar amid some rare positive US data.
• US stocks made further gains, while US factory orders data also gave the loonie a positive tone yesterday. A slight bounce in the price of oil may also be helping the loonie, Brent crude is trading just below the $100 per barrel this morning, up from the $90 levels we saw last month.
• Sterling is losing ground this morning, trading down towards 1.5850. This pair should benefit from some support at current levels. FORECAST
