- Markets quiet in Tuesday’s data void
- The wind up towards full trading begins today
I am having trouble writing my first Daily Currency Insight
of 2007 due to a repetitive Strain Injury caused by the Nintento Wii
bowling and golf games; it’s the most exercise I’ve had in years.
However, I hope this reaches you in the rudest of health and that your
2007 has started on the right foot. Yesterday was a bit of a wash out
with virtually no data as US releases were put on hold as a mark of
respect for the recently deceased ex President Gerald Ford. We did get
improving Purchasing Managers Index from the Eurozone and a
disappointing one from the UK, which may account for the trickle lower
on GBPEUR but today’s US construction spending and Institute of Supply
Managers Indices will be closely watched for direction indicators.
After that we will be on tenterhooks ahead of Thursday’s US
manufacturing numbers and Friday’s US employment data. In the meantime,
we can all choose our least favourite jargon. According to Office
Angels, "let's raise the anchor and let this one drift", meaning to
abandon an idea, is hated by staff. Personally, I have never hear it
used and I would be delighted to hear from anyone who has because I
think it is made up. I’m sure we’re all on the same hymn sheet on this
one.
The Sterling - Canadian Dollar exchange rate reached the highest level
since May 2005 today as a result of traders selling the CAD in
anticipation of a slowdown in US growth also slowing the Canadian
economy. The traders who are doing this have a point as Canada exports
80 percent of its outward shipments to the US, so any slowing in the US
is bound to hamper production in Canada and the knock on effect could
be substantial. There is an increased chance that the Bank of Canada
will cut their base interest rate during the early part of 2007 in
order to avoid a sharp drop in the housing market and employment
prospects for Canadians. Estimates vary but few traders would be
surprised if the current 4.25 percent benchmark rate was down by 25
basis points before the end of the year and most would probably expect
more cuts than this. In the short term, a spike to C$2.30 on the GBPCAD
exchange rate is almost inevitable but there are a number of resistance
levels above this and whilst a sharp spike to C$2.31 cannot be ruled
out, it should be grabbed with both hands by anyone needing to buy
Canadian Dollars
The Pound is looking pretty vulnerable against the Euro and GBPEUR
exchange rate is testing the very bottom of its recent range as I
write. Yesterday’s EU and UK data makes sense of this move and the
generally better mood amongst Eurozone manufacturers is bound to create
some Euro buying momentum. This mornings slight fall in the UK
construction PMI report will do little to enhance Sterling’s prospects.
To be fair, both the Pound and Euro are being flattered by the decline
in the US Dollar, and any return to strong US data will undermine the
strength of both currencies. ‘Which is the strongest’ is the big
question and whilst Sterling has certainly looked the most sought after
in the closing days of 2006, the Euro appears to have started 2007 with
the bit between its teeth. So unless tomorrow’s UK consumer confidence
and mortgage data is immensely strong, we should see further downside
in GBPEUR in the coming days.
"Is Wales closed during the winter?"
A question posed by a tourist to a member of staff at VisitBritain
FX Research and Analysis undertaken by:
David Johnson - Halo Financial
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