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Publication date: 19 November 2012
Author: Richard Driver, CaxtonFX
Tuesday’s eurozone meeting taking centre stage
There isn’t much to look out for in terms of scheduled data releases today, though things get considerably more interesting tomorrow when eurozone finance ministers and the IMF will meet again to determine Greece’s bailout programme. Wednesday brings the MPC minutes, which should provide some clarity on the chances of more QE from the Bank of England.
STERLING/EURO: Sterling trades higher against the euro, helped by pessimistic ECB comments on Greece.
• A member of the European Central Bank admitted over the weekend that Greece will need more financial help beyond the agreed bailout programmes after 2014. This is likely to clash with the approach of IMF chief Lagarde and could well be a stumbling block in this week’s negotiations.
• Sterling is giving back some gains this morning thanks to comments from MPC member David Miles indicating the BoE will consider more QE. This pair is trading back below €1.2450 and may head lower in the short-term.
STERLING/US DOLLAR: Sterling has enjoyed a minor bounce against a softer US dollar as fiscal cliff concerns ease somewhat.
• Reports have emerged of a mildly encouraging Whitehouse meeting between President Obama and Congressional leaders, which has lifted market sentiment and weakened the US dollar.
• With the Greek situation still very uncertain indeed, we favour the USD over sterling and we should see this pair below $1.59 in the short-term.
EURO/US DOLLAR: The euro bounced off the $1.27 level, though resistance should be met a cent higher.
• The euro bounced off the $1.27 level on Friday, helped by an upturn in market confidence. However, $1.28 is likely to prove a tough barrier for this pair to breach ahead of crucial Greek negotiations to be held tomorrow. European markets have opened positively this morning, which suggests there is some optimism out there with respect to the Greece talks.
• The euro currently trades at $1.2775 and there is room for a bit more upside before this pair heads lower once more.
STERLING/AUSSIE DOLLAR: The aussie dollar is firm ahead of RBA minutes and an important speech from Governor Stevens.
• The market will be putting the RBA back under the microscope in the coming overnight session, as it looks for clues as to whether the central bank will cut interest rates again anytime soon.
• In the short-term, we may see sterling lose some ground against the AUD after it made a strong finish to last week. 1.5325 is the current rate.
STERLING/NEW ZEALAND DOLLAR: This pair continues to struggle for direction from the current 1.95 level.
• Risk appetite improved on Friday afternoon, amid hopes for some sort of compromise on the fiscal cliff issue. Data revealed that producer prices contracted in Q3, which adds to the list of weak figures out of NZ of late.
• This pair is trading around 1.95 again this morning, a familiar level from which this rate has not moved far over past two months.
STERLING/CANADIAN DOLLAR: This pair is trading in a very tight range despite some more weak US data.
• Friday brought some poor US industrial production data but the mood was lifted by positive rumours out of the US fiscal cliff talks.
• This pair is trading in a very tight range around the 1.59 level but when we do see it move, we still expect it to be lower.