Market News & Insights
27 November 2014

Dollar Drops As Data Disappoints

EUR/USD 1.2475
GBP/USD 1.5752
GBP/EUR 1.2627 (0.7920)
EUR/CHF 1.2021
GBP/CHF 1.5178
GBP/AUD 1.8375

The USD faced selling pressures yesterday as US markets prepared for the Thanksgiving Day holidays, weaker than expected data from the US started the pre-holiday rout in the greenback which found itself under pressure against its major counterparts over the last 24 hours. Stocks in the US rallied higher as US treasury yields slipped lower, the prospect of lower yields driving investors to seek some returns in equities. Overnight the tone was mixed, both NZD and AUD outperformed following better than expected data from Australia, with capital expenditure figures rising against expectations while the prospect for additional easing from the RBS diminishes. The JPY was also firmer in overnight trade clawing back some ground against a struggling dollar, while the Nikkei also faced selling pressures. Thus far European markets have opened mostly lower ahead of some key event risk in the European session.

The Euro has been trading firmly over the last week moving up off fresh lows against the USD, that is until this morning where the single currency has once again found itself under some pressure. There is plenty of data due for release this morning but the German CPI inflation print will be getting most attention this afternoon, with the base inflation rate expected to decline to .6% from .8%, and the EU harmonised reading expected to be at .5% down from .7%. This will be the lowest reading in nearly five years and anything softer will likely result in additional EUR selling as the markets increases speculation for ECB stimulus expansion. There will also be a number of ECB speakers due to speak as well, Mario Draghi is currently on the wires and once again, comments getting my attention so far are that time is needed for effects of stimulus to materialise, and that ECB measures are to have a sizable impact on the ECB’s balance sheet. There will be a host of other ECB speakers throughout the day as well as Eurozone consumer confidence figures, all carry the ability to impact the Euro to the downside.

GBP outperformed yesterday, the pound had been poised to make a move and a strong run of data helped lift the pound. GDP was confirmed at 3% year on year through Q3, with imports services and consumption all up more than initially guided, while there was a larger decline in exports and investment. The pound initially faced selling pressures but soon regained its footing, GBPUSD broke to the top of its two week range which opened the door for more gains towards the above 1.5800. EURGBP also was dominated by the GBP move, pushing back towards the .7900 figure. UK data is light today and we have some home sales data tomorrow but overall GBP has had one of its strongest weeks in a while and we see potential for further GBP gains next week.