The Obama Effect on Sterling

UK | Sterling

Tuesday 26th April at 10:00 - £1.00 GBP = 1.2896 EUR

Yesterday was a very quiet day with little fundamental data being released. CBI industrial trends released higher than expected at -11, compared with its forecast of -15, however, this did little to move the markets as it is considered lower tier data.

The ‘Obama-effect’ appears to have taken hold as sterling continued its bull run, testing one-week highs of 1.45 (Interbank) against the US dollar. Gains have cooled slightly and we start the day just below 1.45 (IB) as we enter the European session this morning. Analysts believe that the range of $1.40-$1.45 for the currency pair is fairly sticky though we could break out of this range if positive sentiment continues.

The Obama Effect

GBP/EUR also strengthened and continues to trade in the higher levels of the 1.28s (IB) after the currency appreciated over 1% last Friday, following comments from Obama regarding his stance on Brexit. Whilst writing the report, we have seen the psychological level of 1.29 broken.

Again, it is a quiet day for sterling, with little market-moving economic data coming out, so the currency will be at the mercy of the markets and any more news regarding Brexit.

Europe | Euro

Is the German machine running low on fuel?

Yesterday’s data from the European bloc kicked the week off with the German IFO business climate numbers and expectations. This release showed that German business confidence has marginally slowed. Figures from the German IFO, which surveys over 7,000 business, indicated that Europe’s largest economy is losing some pace, with the index falling to 106.6 in April from 106.7 the previous month. However, the mood in the German economy still remains resilient with little movement in the early morning session following the release.

In other news, Greece has come back on to the agenda leading to further uncertainty on the horizon. Meetings amongst the euro-group members have been unsuccessful in the plight to stop a default on the next payment in July, thus casting a shadow over the European bloc over the short to medium term. This could mean a potential weakness for the single currency if the situation continues to be unresolved.

Economic data is thin on the ground today, the next batch of significant data of note from the eurozone is on Thursday, when the unemployment change and unemployment rate figures are released, along with consumer confidence and business climate numbers. With the euro shrugging off yesterday’s German IFO figures, the markets will be watching the coming releases closely.

USA | US Dollar

Housing markets continue the trend

New home sales data came out once again at a disappointing 511k from a previous figure of 519k. Although the figures seem to be showing slumped demand, cheap borrowing costs and solid hiring figures should help ensure that real estate in the US continues to expand.

GBP/USD finished the London session with a 0.5% gain, with the day’s data release causing negligible volatility in the pair. The EUR/USD pair also finished off with a 0.46% gain.

As for today, we have some mid-tier economic data scheduled, including durable goods orders and conference board consumer confidence. Some volatility for the dollar could be a possibility throughout the day with the figures due at 1.30pm and 3.00pm respectively. Although the data releases today may have an effect on the currency, investor’s eyes will be on the all-important crude oil inventories and federal statements due out on Wednesday.

Elsewhere

Uncertainty in Japan

The Japanese yen shot up on Monday, pulling away from multi-week lows against the euro and the US dollar, as the market anticipates Thursday’s Bank of Japan monetary policy meeting. Rumours from Japanese experts that we are likely to see fresh stimulus delivered on Thursday led the market to start the week in a hectic manner. It will be interesting to see how this develops as we get closer to Thursday.

In terms of data releases, today is another quiet day. The only point of note will be Bank of Canada Governor Poloz speaking this afternoon at the Canada-US Securities Summit in New York. Markets will be looking to a packed day tomorrow as we have data due out from Australia, New Zealand and Japan.

Data Releases Today

13:30: USD, Core Durable Goods Orders m/m

13:30: USD, Durable Goods Orders m/m

13:55: CAD, BOC Gov Poloz Speaks

15:00: USD, CB Consumer Confidence

18:00: GBP, MPC Member Cunliffe Speaks

23:45: NZD, Trade Balance

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