Market News & Insights
24 September 2013

Markets Look to Data For Direction

EUR/USD 1.3508
GBP/USD 1.6033
GBP/EUR 1.1865 (0.8428)
EUR/CHF 1.2299
GBP/CHF 1.4597
GBP/AUD 1.7027

As mentioned towards the tail end of last week, markets seem happy to pause and take stock, post last week’s decision by the US Fed to go against market consensus and to not start the tapering process. As a result, markets are happy to trade sideways with little or no major news to discuss. Even the weekend’s German election has been a non-event for the currency markets. One thing to take from last week is that the Fed will focus on data and very little else when making its decision.

With that in mind we start to see a busier schedule for tier1 US economic releases, starting later today. First up of note is the month on month house price index that is expected to show a 0.8% increase for the month of July versus 0.7% in June. Next up is the ever important latest reading of Consumer Confidence for the American economy, a key gauge of its health as consumer spending contributes a huge portion towards the overall economy. A reading of 80.0 is the consensus, a drop from 81.5 the previous month. Whilst traditionally a volatile measure due to the survey process, nevertheless any reading that misses expectations by any mark will certainly impact currency markets later today.

The quieter currency markets have resulted in some profit taking after the US Dollar shifted some heavy losses last week. Versus the single currency, EURUSD is lower this morning albeit off the overnight low of 1.3488 and back at 1.3511. Similarly, GBPUSD has moved lower but significantly has managed to hold onto support above the 1.60 mark, a level we know is important for many importers. With the above two pairs tracking each other lower, no surprises that EURGBP remains relatively unchanged at .8428 (1.1865). We also have German IFO figures out later this morning.

A story that is getting a little attention this morning and potentially a cause for a dip in the euro is ECB President Draghi’s comments to the European Parliament that banks will get more support if there are signs of increasing interest rates at which they lend to each other. He commented that they “are ready to use any instrument, including another Long-Term Refinancing Operation (LTRO) if needed”. Any expansion of the ECB’s balance sheet normally weakens the currency.