GBP/EUR 1.3624 (0.7338)
It was a whipsaw day across FX markets yesterday as global risk appetite remains uncertain. Equity markets stabilised somewhat but the tone remains cautious. The Euro faced selling pressures through much of the European session yesterday, losing ground against both the USD and GBP (amongst others), before rallying higher through the latter part of the day, with EURUSD breaking out this morning and already up over 1.3% from yesterday’s lows. Confirmation Eurozone growth was at 1% year on year did little to provide support for the single currency in early trade yesterday as Greek concerns weighed, however it is a different story this morning as the single currency rallies across the board, with demand for EUR growing as German 10 year yields exceed 1%.
It was a mixed bag for GBP, gaining ground vs the euro in the early session, while losing ground against the greenback, before GBPUSD once again rallied higher into the European close, now up over 1.25% from yesterday’s lows as the greenback struggles. There has been little major data driving the USD, it’s partly been giving back some ground from Friday’s post NFP rally, but also hope of a Greek resolution helping lift EURUSD, while USDJPY faced heavy selling overnight following comments from the BOJ Governor, Kuroda suggesting it would be hard to see the JPY’s effective rate falling further, encouraging Yen buying. The Aussie dollar also faced some selling pressures in overnight trade following suggestions from the RBA Governor Stevens that policy makers could be open to further easing, while it was likely it would be “quite some time” before the RBA considered raising interest rates.
There is plenty of fundamental data for GBP today, with industrial and manufacturing production both due to have slowed through April, while the NIESR GDP estimate is also due this afternoon with month on month growth expected around .4% . This will be followed by a Mansion House speech with BOE Governor Marc Carney and Chancellor Osbourne, the Chancellor will be using the annual address to outline his fiscal plans for the UK and as such the pound will likely be in for a day of volatility. EURGBP trades towards the higher end of its .7450 to .7020 range in place since early Feb, we continue to favour to sell EUR in rallies towards .7450 area, favouring EURGBP downside. GBPUSD has been range bound between 1.5450 and 1.5170 for 2 weeks, we broke to the topside of this range this morning, suggesting we may well see a push higher towards recent highs above 1.5700 should support the technical break.
Greek talks continue to weigh on Markets, but again despite some positive news flow complacency remain a concern. News reports the Greek Government had delivered a revised reform plan crossed the wires yesterday and helped lift the Euro and the tone across global markets, however this apparently was more of a “medium term solution” according to a Greek Government Spokesman. A meeting today between Greek PM Tsipras, Angela Merkel and Francois Hollande will take plenty of attention as markets look for any sign of a deal. Failure to agree anything this week really turns up the pressure, while obligation for June have been pooled together, a further extension for Greece would require the approval of national parliaments to proceed, once again this will take time and put Greece under risk of capital controls.