A boost for UK PMI yesterday spurred on GBP buyers, leaving the Euro on the back foot against Sterling’s advances.
The UK has gone from strength to strength recently, and although the Eurozone also produced some relatively optimistic PMI data yesterday, the single currency remains burdened by the second largest Eurozone economies lack of performance, as French firms produced a declining figure of just 47.9 by comparison to the UK’s 58.2 reading.
This optimistic bought of data from the UK is expected to have an extremely positive knock on effect for the economy, with a huge amount of jobs being created, a confidence boost for businesses and Growth expansion for Feb which should only be viewed as positive for Sterling when the data is released later this month.
Moving forwards we still feel more losses are due for the struggling Euro and gains for the well supported GBP, leading to an inevitable move higher for GBPEUR rates, through the 1.23 level initially before another move even higher can be established.
Today the ECB will reveal its inflation forecasts along with its March policy meeting. This will be significant as it may reveal measures the ECB could take in an attempt to boost Inflation, including potentially cutting already low interest rates. If the ECB do decide to cut interest rates again then we would expect Euro losses as a result.
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Cable seems to have tracked sideways around the 1.67 pivot point recently, as the effects of the poor winter weather conditions in the US finally filtered its way down to the currency, producing worse than expected US Employment and PMI data yesterday.
This spate of weaker than expected economic data seems to be mainly attributed to the severe weather patterns experienced in the US during winter. As such economists are predicting a significant pickup in activity as we move through Spring, which should only bring support to the Dollar.
Although the next few weeks could see the currency oscillate between its range, our view remains the same with any moves higher being limited to resistance under the 1.70 area, but the propensity of a move lower on behalf of an undervalued USD trumping the likelihood of any significant moves higher as we move through the year. My expectation is for support at 1.60 and 1.62 to pose a potential stumbling block as the pair moves lower, however once a clear breach of the 1.60 level has been established, I expect little to stand in the way of the currency moving close to the low of its yearly range once more.
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The AUD gained support during the early hours of trading yesterday after GDP figures indicated better than expected growth during the final Quarter of 2013.
This briefly strengthened the AUD, pushing rates lower through the 1.8550 barrier, before better than expected UK PMI pushed GBPAUD rates back above 1.86.
The RBA seem keen to keep the AUD weak at the moment to assist the country’s exports and therefore aid their economic prospects. As the UK and the Pound move from strength to strength, I feel it won’t be long before GBPAUD rates push back above the 1.90 barrier in search for even higher levels.
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