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GBPEUR Pound Sterling to Euro: Credit Suisse, BNP Paribas and Credit Agricole all expecting 1.4280ish

GBP (Pound Sterling)
Sterling looked like it was staging a comeback. Indeed, the delaying of interest rate hike expectations to as far out as 16 months from now was probably a bit overdone. Granted, we’re not going to raise any time soon, but we’re not in that bad shape. As a result we weren’t surprised to see a mild rally in the pound against the likes of the euro and dollar. Indeed, I think it’s likely to continue against the euro, so euro sellers should take advantage of any dips, however after looking like GBPUSD wanted to consolidate in the upper half of the 1.50s, we’re back below 1.53, not helped by yesterday’s lower than expected GDP reading.

USD (US Dolar)
It’s Fed day today, and there isn’t much data from anywhere else. Even the most hawkish of analysts don’t expect the Fed to actually move today after the most recent huge miss in Non-Farm Payrolls data. More likely, is that this announcement, and the following statement will be taken as an opportunity to prepare the market for a December hike, if one is even to be made this year. Yellen did say that markets should prepare themselves for a 2015 hike, however that was before employment data took a nosedive. The dollar has firmed up these last few days, pushing EURUSD nearer 1.10 and GBPUSD below 1.53. New Home Sales, Durable Goods and Consumer Confidence have been the only releases of note so far this week, and all have disappointed versus analysts’ expectations. After today we have GDP, Pending Home Sales, Employment Cost Index, Core PCE and Personal Spending for the rest of the week. Data just released showed that investment banking had a terrible quarter to end September, especially on Wall Street with revenues from fixed income, currencies and commodities down 23% -watch your spreads if you still use your bank.

EUR (European Central Currency)
German Ifo Business Climate met expectations on Monday, and the M3 Money Supply was broadly as expected yesterday. Draghi put paid to any short term euro strength with his comments that the ECB were indeed prepared to print more money and even consider further rate cuts deeper into negative territory if required. The current wave of cheap cash in the form of QE has undoubtedly boosted equities in the region and helped narrow credit spreads, particularly in peripheral nations – refreshingly it’s been a while since anyone has mentioned Greece. However, there’s very little evidence that QE has filtered through into increased credit availability for individuals and businesses. CPI, Unemployment and Retail Sales are up the rest of the week, but nothing today. Credit Suisse, BNP Paribas and Credit Agricole all have positions in GBPEUR expecting 1.4280ish in the near term. Similarly, we see six major institutions with considerable positions in EURUSD, all expecting below 1.10.


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