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Currency Report 12/Dec -GBP back above €1.19 v Euro and $1.64 v USD, where next ? ? ?

Currency Report 12/Dec -GBP back above €1.19 v Euro and $1.64 v USD, where next ? ? ?

 
Old Dec 12th 2013, 9:38 am
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Default Currency Report 12/Dec -GBP back above €1.19 v Euro and $1.64 v USD, where next ? ? ?

UK News & Data releases
The Sterling to US Dollar exchange rate has come under pressure, correcting lower after making a new year higher earlier this week. Failure to retest the area has seen GBP/USD trade lower. There is little on the calendar from the UK that could potential drive GBP/USD today. The USD will likely dominate moves in GBP/USD. Some analysts are saying we think the 1.6320 area will be good initial support beyond that the 1.6260 level will be decent support.

USA News & Data releases
US retail sales will see some market focus today at 13:30; however, some doubt this will have much impact on the rates. It has been previously argued that the market has somewhat come to terms with the separation of QE ‘tapering’ and monetary policy tightening, it is now unlikely that better US data will have much impact on the USD, as we have seen over the past couple of weeks. The announcement that Congress have agreed on a budget deal will be seen as a positive step forward but this agreement must now be passed by the House and then to the Senate for consideration – perhaps as early as next week. If the deal is passed ahead of the FOMC meeting next week, it does suggest increased risks of the Fed announcing ‘tapering’ next week. As it will effectively eliminate one of the committees potential concerns. Nevertheless, the flow of economic data and the progress of the economic recovery will remain a key factor in the tapering debate. With the market having discounted the importance of ‘tapering’ many see little reason for USD gains.

Euro zone news & data releases
The Euro to US Dollar exchange rate continued to grind higher, making a high of $1.3811 yesterday. We think risks are to the downside for Eurozone industrial production today out at 10:00am. German and French numbers released earlier this week were weaker than expected, declining on the last month. However, some think the data will unlikely have much impact on EUR/USD. We think the upside momentum looks set to prevail, and we look for a test of the year’s high of 1.3832.

Scandinavian news and data releases
Swedish Inflation numbers will be a focus this morning. Inflationary pressures were broadly weak throughout the G10 economies in October, and Swedish CPI surprised sharply on the downside, with headline inflation falling back into deflationary territory. The market is expecting a modest improvement in November, but is still expected to be well below the Riksbank projections. Weaker than expected numbers will likely increase market concerns of a Riksbank interest rate cut at next week’s meeting. The market is currently pricing in a 33% probability of a cut.

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