Tuesday, January 4, 2011

GBP Surges; USD Gains on JPY, CHF; AUD and NZD Retrace Steps

1. GBP Surges on Manufacturing, Mortgages, Money Supply
UK markets come back from a three-day break to find that sterling is enjoying almost a perfect storm. Early strength has been linked with HSBC's need to buy for divided payments, then data showed the UK manufacturing PMI at a 16-year high (at 58.3 for December), mortgage approvals beat consensus (48K compared to forecast 47K), M4 growth hit its highest since March 2010 and just for good measure the FTSE is playing catch-up and adds almost 1.5%.

The GBP/USD rallied from overnight lows of 1.5453 to 1.5644. The EUR/GBP fell down from a low near 0.8650 in late yesterday's session to 0.8566 prior to the NY open.

2. USD Strengthening Against Other Safe-Haven Rivals JPY and CHF
This week has started off well for the US economy, as manufacturing data showed activity in the sector expanding robustly. Factory orders data is expected to show orders falling at a slower pace, and we look forward to Friday's data which is expected to show some strong job growth for December. The outlook for a stronger economy helped the USD to rally on against its other low-yielding "safe-have? rivals. Both the USD/JPY and USD/CHF pair were sold to end 2010, and the USD could just be retracing its steps, but we saw the USD/JPY extend its rally from yesterday's global session, pushing up through 81.80, hitting a high near 82.27. The USD/CHF, which looked like it was establishing a bottom yesterday, rose from its low near 0.9325 to start the global session and rose all the way to 0.9473.

3. AUD and NZD Correct Recent Gains
The AUD/USD and NZD/USD pairs were sold off a bit overnight, as these two Asian-Pacific commodity currencies were bid up rather well as we concluded the last week of 2010. Now, they are in correction. The AUD/USD slid from its levels near 1.02 yesterday to test the 1.0053 area overnight. The Aussie was pressured by some weaker Australian data - the country's Manufacturing PMI fell to 46.3 in December from 47.6 in November. The NZD/USD retracted 38.2% of its rally from 0.7450 to 0.7815.
News that China's manufacturing cooled in December is also likely being priced in after traders were away from their trading desks in Australia and other Asian-Pacific financial centers in yesterday's session.

Source: ActionForex.Com

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