- US December Existing home sales at 15.00pm
The absence of economic data releases this week has done little to
stem market volatility in the currency markets as Central banker’s
minutes and comments take up the data slack. Yesterday’s announcement
that the BOE minutes reported a 5-4 split in the vote to raise UK
interest rates, really shook the cage and raised doubt Mervyn King
would be able to push through another rate hike in February, as the
market expected a much clearer 7-2 decision in favour of February’s
interest rate hike. Last night, King clearly stated his position in his
speech to the Birmingham Chamber of Commerce when stating that “when
inflation moves away from target, we must prevent the anchor from
dragging. Expectations need to be firmly fixed on the 2% target.”
This morning German business climate IFO was weaker than expected
pushing the Euro and Pound down against the US Dollar. Those waiting
for GBPEUR to resume its upward trend may have to wait as a test of
€1.5000 and below is now more likely in the short-term.
Later today
for the US Dollar we have the weekly US initial jobless claims and more
importantly December US existing home sales at 15.00pm which are
expected to remain steady at 6.25 million units.
The Japanese Yen strengthened overnight after newswires reported
European Finance Ministers will raise their concerns over the record
level of EURJPY at the next G7 meeting in an attempt to reverse this
trend.
And lastly for those of you looking for a perfect secret Santa gift
for the end of the year - the future is smelling rosy for US underwear
maker Under-Tec, which has designed pants that hide the smell of
flatulence. The Under-Ease line has a replaceable filter of felt,
charcoal and fibreglass wool. Sealed with elastic at the waist and
legs, the pants are available at www.under-tec.com
for £12. Not only do we give out secret Santa gifts but we also have a
likely recipient in the name of our very own Ricky Nelson. Some say
he’s a great trader. Others say he’s full of wind. We say he’s both.
This morning the Reserve Bank of New Zealand left interest rates on hold as expected at 7.25%
but warned that an increase is likely unless the NZ housing market and
domestic sector start to slow down. So what are the chances the NZ
housing market slows down from its current 20% pa growth? Not likely
unless the RBNZ hike rates to 7.50% in March. With inflation in NZ
well above the RBNZ’s monetary policy target the RBNZ (as much as they
will hate to do it) look to have little choice but to raise interest
rates again.
This was the conclusion of the markets after
Governor Bollard’s comments last night and as a result we saw the
GBPNZD exchange rate fall 4 cents to sit right on a very important
support line. A hike in NZ interest rates will exacerbate the
nightmare NZ exporters currently face as the Kiwi Dollar strengthens
and will further damage the crucial farming sector. For NZ Dollar
buyers out there this story should be closely monitored in case we see
a continuation in this fall.
strategy for you.
The US Dollar has reversed over 40% of the 5 cent rally from $1.92
in the last few days. This correction lower in the Pound appears to be
temporary and should target $1.9420 to $1.9570 if support at $1.9665
breaks today.
We
have long held the view that $2.00 may be the very top of the market
with a 10% fall from here possible by year end, as it becomes evident
the US Fed will not be cutting interest rates anytime soon. We actually
think the next move by the Fed will be an interest rate hike which will
make a massive move higher in the GBPUSD exchange rate from its current
levels extremely difficult.
What makes the outlook very
interesting is the massive 60 cent variance in analyst’s forecasts as
to where the Pound will sit against the US Dollar at the end of the
year. Will it be $2.20 or $1.60 - we think it will be $1.80 so we
strongly recommend US Dollar buyers protect themselves against this
eventuality.
According to a new survey, 90% of men say their lover is also their
best friend. Which is really kind of disturbing when you consider man’s
best friend is his dog.
Jay Leno
FX Research and Analysis undertaken by:
David Johnson - Halo Financial
|
