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Global Foreign Exchange Market News Update

Jul. 30, 2013 10:54 AM ET
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Global Foreign Exchange Market News Update

GBP/USD is currently trading at 1.5340, GBP/EUR is at about 1.1560, so GBP/EUR is roughly unchanged to where it was this time on Monday and the GBP/USD is just a little bit stronger over the course of the past 24 hours, alongside other safe haven currencies such as the Japanese Yen and the Swiss Franc, just on the basis of a little bit of caution coming into equity markets and FX markets, ahead of the three major central bank meetings over the course of the week. The Federal Reserve obviously would have its meeting Wednesday night, the Bank of England and the European Central Bank will be on Thursday.

We are not expecting any real change in policy from any of them over the course of this week and any changes to language will be very incremental, but people are just worried that we may see them come out and suggest something, for example a cut in the unemployment rate, maybe flash out the details of forward guidance in the UK, or maybe a rate cut from the ECB. All these things are very much up in the air, so people are very reticent to commit new capital to these markets, hence the kind of sideways movement that we are seeing at the moment.

One fx currency market that we haven't seen the sideways movement is the Australian dollar, the Australian dollar got hit very hard overnight, after Governor Steven (governor of the Reserve Bank of Australia) said that there's certainly scope for further interest rate cuts in Australia, given the inflation outlook there. Rates are already at record low of 2.75%, we're now pricing in a 0.25% cut by the RBA at their September meeting - that will take rates down to 2.50%, which is a 2.25% cut since November 2011. So you can see just how quickly rates have come in the Australia dollar.

The Australia dollar is down around 1.50% overnight and is looking to break that 90 level against the United States dollar - the GBP/AUS can be trading could be trading above 1.7000 by the end of the day, especially Wednesday as well if we get a good sterling PMI figure and China is overnight is expected to be poor.

Elsewhere, we are expecting a holding pattern as we wait for the Central bank meetings, big thing on Wednesday before the Central banks will be U.S. GDP and it is expected to show a slower rate of growth compare to first quarter, mainly as a result of the budget sequestration and obviously the spending cuts and tax rises that's put into force, so we'll wait and see on that.

In the meantime, Euro Zone data - talking about the Spanish GDP's come out a little bit better than expected -1.7% versus -1.8% from a year ago previously. Interesting figures latter on would be the US consumer confidence that comes out at 15:00 GMT, but as they say, everything on a holding pattern waiting for the Central Banks latter this week.

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