GBP/EUR 1.3665 (0.7317)
Friday was a bank holiday across much of the Eurozone and yesterday the bank holiday in the UK and Ireland as well as Japan saw lower volumes traded in FX, this thin liquidity kept major FX pairs within relatively tight ranges through yesterday but Friday saw some notable moves in USD in the evening. The greenback had faced almost two weeks of steady selling but several data points suggest the US economy may well be stabilising once more after a weak Q1 and this helped the dollar advance as well through yesterday’s quieter session. GBP found itself under selling pressure late on Friday and while it has struggled to pick itself up against the USD it has managed to claw some ground back versus the EUR which has failed to hold recent highs despite better than expected data once again from the region, with Greece once again taking focus.
Overnight the RBA cut Australian interest rates to a record low 2%, this saw some AUD selling initially however the Aussie has managed to pull back some ground as the overall tone of the accompanying statement was rather upbeat which would suggest the possibility of further easing in the near term has diminished. The economic calendar in the European session is somewhat void of any major data points but construction PMI data from the UK should get some attention, especially after the large miss in manufacturing data on Friday. GBP also has the General Election to contend with this week and the only thing that is clear about this election is that it is going to go to the wire, which creates uncertainty for GBP. The pound rallied towards just short of 1.5500 last week before dropping back to just above 1.5100 against the USD and while weakness remains against the USD it has clawed back ground against the EUR, trading back from .8400 briefly traded on Friday evening.
Later this afternoon attention will be on the US session and the release of trade balance and services data. April’s Non Manufacturing ISM composite will be taking firm attention to see if the weak US data was just a Q1 blip, expectations are for services growth to have decelerated from 56.5 to 56.2 through April, however anything on par or better than expected will likely provide the USD further room to run especially if it see market increase their expectation for US rate hikes but with Friday’s labour market report likely to take greater attention follow through on USD may be limited.
Greece will also be on the radar this week as their IMF payment is due tomorrow. While the side-lining of Greek Finance minister Varoufakis has appeared to assist Greek debt talks a report by the Financial Times over the weekend suggest both side still remain well apart on discussions. We have been here countless times before, a probability would favour some form of agreement in the shorter term.