This week is probably one of the quietest I’ve seen in terms of data from the UK, with more fundamental data released over Christmas and New Year than this week’s Average Earnings Index and Unemployment Rate. This leaves the pound very much at the whim of its trading counterparts, drifting within tight ranges against the dollar and struggling to maintain recent highs against the euro, albeit remaining significantly above the important psychological level of 1.40. Morgan Stanley is betting on the pound sliding to 1.5380 against the dollar and Credit Agricole 1.4850, however BNP Paribas and Credit Suisse are both expecting the pound to appreciate against the euro to 1.4815 and 1.4420 respectively (GBPEUR). Morgan Stanley is licking its wounds after their position targeting 1.51 was stopped out.
The People’s Bank of China (PBOC) devalued the Yuan by a record 1.9% in an unexpected move overnight, the knock-on effects of which are a stronger dollar across the board. Beijing gave some nonsense explanation about enhancing market orientation, but there aren’t many market participants who don’t view the move as an attempt to boost exports. New York Fed President Dudley is speaking tomorrow, which will be watched closely by traders as we get ever-closer to the September FOMC meeting where bets are almost 50/50 that the Fed will act to move rates away from record lows. Also due later this week are Retail Sales, PPI and Consumer Sentiment readings, all of which have market moving potential given their importance to the interest rate outlook.
The ZEW Economic Sentiment Survey is due this morning from both Germany and the broader Eurozone. Given the much higher expected reading from the Eurozone as a whole compared to the Germany-specific reading, one wonders which regions are finding things so much rosier than Europe’s largest economy. Probably Greece, which has, it is reported this morning, completed negotiations to borrow more money to pay back money it previously borrowed in a big Wonga merry-go-round. Neither ZEW reading is likely to be able to give the euro much of a boost even with the backdrop of a ‘fixed’ Greece, as nothing can detract from the fundamental environment of easing monetary policy.
Telegraph – Sunny retail Sales figures fade away as rain drives Britons indoors.
Independent – Barclays bans flip flops and jeans from its Canary Wharf head office.
FT – Jobs boost as apprentices fill skills gap.
Pound Sterling (GBP), Euro Currency (EUR), US Dollar (USD) exchange rates commentary is provided by Argentex (Ag-Fx.com)