Headlines
GBP/EUR Climbs Beyond 1.36
– Eurozone Officials Gather to Discuss Greece
Euro Volatility Expected
– Common Currency at 7-Year Low
US Markit Manufacturing PMI Ahead
– GBP/USD Holds Gain after FOMC Minutes
Canadian Dollar Lower on Oil Price Slide
– Canadian Retail Sales in Focus
Sterling
The Pound has enjoyed a bullish week of trading, striking fresh highs against both the Euro and US Dollar as a result of impressive UK ecostats and adjusted Bank of England (BoE) interest rate hike expectations.
This week’s UK Consumer Price Index showed that the non-core measure of inflation dropped to its lowest level for over 25 years in January. However, climbing core inflation and a standout employment report for the three months through December saw investors bet that the BoE might raise borrowing costs sooner than currently expected. The Pound was buoyed as a result and advanced by at least 0.4% against all of its major rivals.
On Friday the GBP/EUR pairing breached the 1.36 level as investors focused on the ongoing Greek debt saga.
A positive UK retail sales print, though unexpected, would round off an encouraging week for British data and could push the Pound higher still before the weekend.
Euro
Thursday saw the Euro come under additional pressure as the Greek proposal for a six-month financial assistance programme was dismissed by German officials.
Although reports of conversations taking place between German Chancellor Angela Merkel and Greek Prime Minister Alexis Tsipras have since emerged, investors remain weary ahead of today’s crunch Eurogroup meeting.
Greece is fast running out of funds and if the nation fails to reach an accord with its creditors in the hours ahead, the Euro could extend declines.
While the Greek situation is the major driving force behind Euro movement at the moment, the day’s Markit Manufacturing/Services PMI’s for the Eurozone and its largest economies may also have an impact.
Both the German and French manufacturing measures printed below expected levels.
US Dollar
The US Dollar’s uptrend against the Pound paused this week as the British currency was bolstered by upbeat domestic reports and the ‘Greenback’ was pressured lower by surprisingly dovish meeting minutes from the Federal Open Market Committee (FOMC).
As the minutes commented on the current international economic climate and the slowing of domestic inflation, they hinted on the possibility of US interest rates remaining lower for longer and the GBP/USD pairing was able to achieve a one-month high.
Policymakers also deemed the US Dollar’s strength as a ‘persistent source of restraint’ to exports.
However, the tense situation in Greece has bolstered demand for assets with safe-haven qualities, like the US Dollar, and the North American currency began Friday’s European session trading in a stronger position against several of its main rivals.
Today’s US Markit Manufacturing PMI is expected to show a slight softening in output. A figure wildly deviating from estimates could be a cause of US Dollar volatility.
Canadian Dollar
As the weekend approached and oil prices resumed their decline, the Canadian Dollar fell back below 80 cents against the US Dollar before returning to trend in the region of 0.8022 on Friday.
Crude dipped to $51 a barrel after previously hitting a 2015 high of $62 a barrel.
Today’s Canadian retail sales figures could cause some ‘Loonie’ movement.
Sales are believed to have fallen by -0.4% on the month in December, wiping out the previous month’s 0.4% gain.
Australian Dollar
After posting widespread declines in response to a report implying that Australia’s AAA credit rating could be at risk, the ‘Aussie’ staged a rebound during the local session.
Top ratings agency Standard & Poor’s dismissed previous claims that domestic and international uncertainty could cause a negative revision to the South Pacific nation’s coveted credit rating, and the Australian Dollar gained accordingly.
However, if today’s Greek debt discussion breaks down and spurs a bout of risk aversion; the higher-yielding ‘Aussie’ may be pressured lower.
New Zealand Dollar
The New Zealand Dollar tracked its Australian relation higher during the local session.
The ‘Kiwi’ also continues to derive support from the FOMC meeting minutes, with bets that the Fed might delay increasing borrowing costs lending support to riskier assets.
Data Released Today
EUR Markit Eurozone Composite PMI (FEB P)
EUR Markit Eurozone Manufacturing PMI (FEB P)
EUR Markit Eurozone Services PMI (FEB P)
GBP Retail Sales Ex Auto (MoM) (JAN)
GBP Retail Sales Incl. Auto (MoM) (JAN)
CAD Retail Sales (MoM) (DEC)
EUR Euro Area Finance Ministers Hold Emergency Meeting on Greece
USD Markit US Manufacturing PMI (FEB P)