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Darren Kilner

Darren Kilner

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When to buy Currency, Know when to buy Euros and Dollars

Disclaimer: THIS MATERIAL IS NOT INVESTMENT RESEARCH AS DEFINED BY THE FINANCIAL CONDUCT AUTHORITY

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CURRENCY SNAPSHOT

EUR – Under pressure as the IMF looks for Greek debt relief
GBP – Holding steady given the lack of UK data out today
USD – Growth, jobs and inflation figures eyed this afternoon

YESTERDAY

Very little economic data was released yesterday. German Consumer confidence kicked off the day with no surprises as the result of 10.1 came in line with expectations. In the UK Consumer credit and Mortgage approvals surpassed expectations and helped support the pound.

The Euro came under pressure yesterday as the Head of the IMF, Christine Lagarde, warned that Greece needs significant debt relief in order for the third bailout to be successful, she stated that “for any programme to fly, a significant debt restructuring should take place.” Today, the IMF’s lead negotiator Delia Velculescu, will arrive to resume the assessing of the Greek economy and how it can meet its new fiscal targets.

Overnight, the Federal Open Market Committee (FOMC) made no change to its interest rate range of 0.00% to 0.25%, in a unanimous decision. The Fed statement reiterated that the timing of a rate hike is dependent on economic data over the next few months. The statement was very similar to the one released in June, although it seems as though Fed views conditions in the housing and jobs markets as having improved somewhat. The dollar gained some strength following the meeting, though the markets are still left unsure as to the timing of the next rate hike in the US.

Thursday 30 July 2015, 10:25am

CURRENCY SNAPSHOT

EUR – With no data out EUR is at the mercy of the other Majors
GBP – Preliminary GDP gives Sterling a good day on Tuesday
USD – FOMC Rate and Statement out this afternoon

YESTERDAY

It was quiet on the data front yesterday but markets reacted to a couple of important releases. From the UK Preliminary GDP came out in line with expectations (0.7%) which the market received very positively indicating that a disappointing result may have been priced in. The figure helped Sterling claw back Monday’s losses against the Euro and rise to a five day high against the Dollar.

The GBP/USD high was assisted by a terrible CB Consumer Confidence survey in the US - 90.9 down from the expected 100.1.

The result is surprising considering the fact that market sentiment towards the US is currently quite high with many expecting a rate hike this year.

It was more of the same from RBNZ Governor Wheeler who spoke overnight saying New Zealand is facing further rate cuts and a weaker dollar in order to support the economy.

TODAY

It should be a slow start today with second and third tier data dominating the morning. GfK German Consumer Climate had also been released at the time of writing, coming in at the expected 10.1 but failing to help the Euro regain lost ground.

The big hitter is in the afternoon with the US releasing their Federal Funds Rate and accompanying FOMC Statement. No change is expected in the rate but all information will be dissected for hints on the timing of the eventual rate hike.

Wednesday 29 July 2015, 09:33am

CURRENCY SNAPSHOT

EUR – With no data out EUR is at the mercy of the other Majors
GBP – Preliminary GDP gives Sterling a good day on Tuesday
USD – FOMC Rate and Statement out this afternoon

YESTERDAY

It was quiet on the data front yesterday but markets reacted to a couple of important releases. From the UK Preliminary GDP came out in line with expectations (0.7%) which the market received very positively indicating that a disappointing result may have been priced in. The figure helped Sterling claw back Monday’s losses against the Euro and rise to a five day high against the Dollar.

The GBP/USD high was assisted by a terrible CB Consumer Confidence survey in the US - 90.9 down from the expected 100.1. The result is surprising considering the fact that market sentiment towards the US is currently quite high with many expecting a rate hike this year.

It was more of the same from RBNZ Governor Wheeler who spoke overnight saying New Zealand is facing further rate cuts and a weaker dollar in order to support the economy.

TODAY

It should be a slow start today with second and third tier data dominating the morning. GfK German Consumer Climate had also been released at the time of writing, coming in at the expected 10.1 but failing to help the Euro regain lost ground. The big hitter is in the afternoon with the US releasing their Federal Funds Rate and accompanying FOMC Statement. No change is expected in the rate but all information will be dissected for hints on the timing of the eventual rate hike.

Wednesday 29 July 2015, 09:33am

CURRENCY SNAPSHOT

EUR – The Euro settles as Greece votes through the austerity packages
GBP – Sterling suffers following poor retail sales data
USD – The Dollar remains strong before the rate statement on Wednesday

LAST WEEK

It was a relatively quiet week on the data front. The main things of note were on Tuesday, when the Bank of England’s monetary policy committee voted to keep interest rates the same. This was despite a lot of speculation that a member could vote for a rise in interest rates – weakening Sterling. On Thursday retail sales from the UK were also worse than expected, coming in at -0.2%. These were the two main pieces of data for the UK, and they contributed to Sterling’s drop off against the Euro in particular.

From Europe there wasn’t much data across the week, however it appears that the Greek situation is being wrapped up as the Greek government voted through the second part of the austerity package. On Friday manufacturing data from Europe came in weaker than expected across the board, however this did not stop the Euro continuing to gain ground against Sterling. There was very little data from the US, however it remained in a relatively strong position as markets remain risk averse.

New Zealand continued the trend for the Australasian region by lowering interest rates from 3.25% to 3.00%. This however was expected following the drop off in the Global Dairy Trade price index. CPI from Australia was worse than expected at 0.7%, however this is still an optimistic reading with countries such as the UK still at 0.0%.

THIS WEEK

Once again we have a relatively quiet week ahead of us. This morning the Euro was helped by the positive reading from the German IFO business climate index. This afternoon we have US core durable goods as well, which is expected to be positive at 0.4%.

Tomorrow morning all eyes will be on the UK as the preliminary GDP for the UK is being released. This is expected to be positive at 0.7%, however with the recent weak manufacturing and retail sales data, there is some potential for a fall here as well.

On Wednesday there is a rate statement from the US, however rates are expected to remain the same. The focus will remain on the US in to Thursday as their GDP and unemployment data is being released. On Friday there is a very quiet end to the week as Australia’s PPI reading and Canada’s GDP dominate proceedings.

Monday 27 July 2015, 10:58am

CURRENCY SNAPSHOT

GBP: Poor retail sales pressures the Pound
EUR: PMI’s in focus today, Greece moves forward towards bailout
USD: Dollar strengthens as jobless claims improve

YESTERDAY

UK retail sales was the main event yesterday, with a reading that disappointed investors as the month on month figure for June dropped into negative territory at -0.2% vs an expected 0.4%. As a result the pound felt the pressure across the board, ending the day about a percent lower against the US dollar and the Euro.

Elsewhere, the USD found support following better than expected jobless claims figures and Canadian retail sales surprised to the upside with a reading of 1.0% vs an expected 0.5%, though this has little effect on the loonie.

Athens took another step forward towards bailout after parliament approved a second set of reforms that was demanded by Greece's creditors. The reforms include changes to Greek banking system and an overhaul of the judiciary system.

TODAY

Overnight, New Zealand logged its first monthly trade deficit of 2015 and the biggest 12 month shortfall in six years. The monthly trade balance turned to a NZD 60 M deficit from a revised surplus of NZD 371M in May. This was worse than the NZD 100M surplus economists had expected, though the reason behind the wide trade gap was an increase in imports, rather than a weak performance of exports.

PMI’s will be the focus today, with releases of manufacturing and services PMI’s in Germany and the Eurozone this morning and manufacturing PMI for the US this afternoon.

The manufacturing PMI is an important indicator of business conditions and the overall economic condition in the Euro Zone. Usually a result above 50 signals is bullish for the EUR, whereas a result below 50 is seen as bearish.

Friday 24 July 2015, 10:09am

CURRENCY SNAPSHOT

GBP: Looking to reassert its recent dominance with positive retail sales figures
USD: Will want to regain its lost ground before the end of the week
EUR: With only consumer confidence to focus on a fairly quiet day is expected

YESTERDAY

Following the pound dropping on Tuesday it regained most of its lost ground against most currencies yesterday, ahead of and following the BoE minutes which voted 0-0-9 keeping interest rates unchanged. With Mark Carney's recent comments some analysts suggested one or two members of the committee could have voted for a rate increase at this meeting which didn't turn out be the case. Some of the members did however suggest they could vote for a hike in August and almost certainly without the Greek situation the outcome of this and the next meeting could have been very different.

In the afternoon US existing home sales were released at 5.49M up from 5.35M last time. The dollar had a little jump against most currencies.

Last night New Zealand announced they have cut interest rates from 3.25% to 3% as expected; incredibly the kiwi dollar strengthened quite well against most currencies around up to 1% in some cases. This morning the rates have calmed a little and are back around the levels prior to the announcement.

TODAY

Today UK retail sales will most likely dominate headlines, there is no forecast for the yearly figure but a good figure will only increase interest rate pressures for the August meeting. Consumer confidence is expected to fall from -5.60 to -5.68.

Later New Zealand's trade balance will be released expected to fall to 100M from 350M.

Thursday 23 July 2015, 09:34am

CURRENCY SNAPSHOT

EUR: Euro regains ground across the board as confidence increases.
GBP: All eyes turn to the UK at 9:30 as the MPC votes on interest rates.
USD: The US Dollar retains position despite lack of data.

YESTERDAY

Yesterday was unusually quiet on the data front, with the only thing of significance being Australia’s monetary minutes. The minutes adopted a “wait and see” tone, as the commodity markets continue to be shocked. Switzerland’s trade balance came in stronger than expected, however this had limited impact on the market.

Across the day, Sterling fell over 1% against the Euro and 0.1% against the Dollar. Sterling had recently been buoyed by an increase in rate expectations, and despite this drop off Sterling is still in a particularly strong position against the Euro.

TODAY

Overnight Australia’s CPI was released at 0.7%. This came in worse than the expected 0.8%, however this was still a significant improvement on the previous 0.2%.

At 9:30am all eyes will then turn to the UK, as the official MPC bank rate votes are being released. Sterling initially bounced back this morning from yesterday’s disappointment, as speculation has developed that one member of the Monetary Policy Committee will vote in favour of a rate rise. Roger Hallam, chief investment officer at JP Morgan stated this.

There is not much data being released this afternoon, with US home sales and crude oil inventories being released. This evening all eyes will turn to New Zealand, as interest rates are now expected to be lowered from 3.25% to 3.00%.

Today the Greek parliament is voting on whether to pass the second package of measures demanded by international creditors for the bailout deal. However, this is expected to be a Yes vote and unlikely to shake the markets.

Wednesday 22 July 2015, 09:15am

CURRENCY SNAPSHOT

EUR: Greece makes a few repayments on time
GBP: Sterling riding high, no significant data today
USD: US dollar also looking positive keeps Cable steady

YESTERDAY

It was an extremely quiet day on the data front yesterday, reflected by the tight ranges during UK trading hours. GBP/EUR fell at open and traded within 40 pips for the rest of the day. Cable was a bit more exciting, falling by around 0.6% at the start of the day and then a slow rise for the remainder to retrieve most of the losses.

The Greece situation is simmering down as they repaid a few small loans on time yesterday. Over seventy per cent of analysts surveyed think that Greece will remain in the Euro this year but the same issues will crop up again next year with half of the respondents saying this current bailout is too small.

Nevertheless the Eurozone is apparently ripe for investment with estimates for profit growth in the region now estimated to rise to 12 per cent from 10 per cent.

TODAY

The RBA Monetary Policy Meeting minutes were released from Australia this morning with a decided ‘wait and see’ tone. The members stated that further depreciation of the currency seems both likely and necessary. Concerning the rate, the Chinese market volatility and the Greek situation have the RBA watching carefully but a further rate change does not seem imminent at the moment.

The Swiss Trade Balance was also released early and was positive at 3.58B. Public Sector net Borrowing out from the UK at 09:30 is due to improve from 9.4B to 8.6B and will wrap up the day’s data.

Tuesday 21 July 2015, 10:05am

CURRENCY SNAPSHOT

EUR: Greek deal sealed and €7bn bridging loan agreed
GBP: Pound continues to be boosted by interest rate hike expectations
USD: US dollar also rides the wave on interest rate hike expectations finishing stronger on the week

LAST WEEK

The pound managed to shrug off generally worse than expected data last week by finishing stronger across the board as BoE governor Mark Carney incited expectations of a rate hike occurring sooner than market expectations. Speaking on both Tuesday and Thursday, Carney commented that the Bank could raise rates on or around the turn of the year to reflect the momentum in the economy and a gradual firming of inflationary pressures. Notably the pound continued its dominance against the euro, Australian, New Zealand and Canadian dollar making new multi-year highs.

Data wise, we saw inflation fall to 0% in June, unemployment rise to 5.6% in May and average earnings only rising by 3.2%, below an expected rise to 3.3%.

The euro continued to weaken despite encouraging developments in Greece. Following months of negotiations, a third bailout for Greece (of around €86bn) looks to be completed following approval in the respective parliaments from across the Eurozone. The EU has also agreed to a €7bn three month bridging loan to Greece that will allow the country to makes its €3.5bn repayment to the ECB as well as clearing its €1.5bn arrears repayment to the IMF.

However the bailout has been criticised by the IMF, commenting that the country will require more debit relief than what has been prescribed. Data wise inflation in both Germany and the Eurozone remained at -0.1% and 0.2% respectively.

The US dollar finished higher against a basket of currencies following remarks made by Fed chair Janet Yellen that the central bank is on track to raise interest rates before the year end. Data also supported the dollar, with industrial production rising by 0.3%, housing starts and building permits rising by 1.174mn and 1.343mn and consumer and producer inflation rising by 0.1% and to -0,7% respectively. The US dollar index finished the week higher.

Away from the majors, data from China surprised to the upside with Q2 GDP remaining at 7% and retails sales and industrial production rising by 10.6% and 6.8% respectively. Data from Canada disappointed with inflation falling to 0.2% and the Bank of Canada cutting interest rates from 0.75% to 0.5% in order to boost consumer spending and business investment.

THIS WEEK

In focus this week will be the central banks of Australia, England and New Zealand.

Whilst the RBA held interest rates at 2% on the 7th July, the release of the minutes could reveal the possibility of an upcoming rate cut given the current global slowdown and increased supply of commodities hitting Australia hard.

Wednesday’s Bank of England minutes from its July 9th meeting could well show a surprise if indeed the Bank of England’s recent comments on a rate rise are anything to go by. The MPC minutes will be the last to be released two weeks after the rate statement with ongoing minutes being released immediately after the rate statement.

Thursday's Reserve Bank of New Zealand rate statement could put the New Zealand dollar under further pressure with recent dairy trade falling to a 6 year low and the recent decision by the BoC to drop rates. Expectations are for the RBNZ to lower rates to a record low of 2.5%.

Monday 20 July 2015, 10:27am

CURRENCY SNAPSHOT

EUR: Germany votes today on the Greek deal.
GBP: BoE Governor Carney hints at end of year rate hike.
USD: Fed Chair Yellen also indicates rate to rise soon.

CURRENCY SNAPSHOT

The Pound was the big winner yesterday after the clearest indication from BoE Governor Mark Carney that a rate hike is on the cards, perhaps as early as the end of this year. He said that “the need for Bank Rate to rise reflects the momentum in the economy and a gradual firming of underlying inflationary pressures”.

He cooled things down by saying that any changes to the economy (including exchange rates) would influence the timing and amount of any raise. He also mentioned that the UK interest rates would most likely rise at about half the speed of US interest rates based on the additional exposure of British households to any rate shift.

Fed Chair Janet Yellen testified before the Senate Banking Committee and fielded questions about the US’ own potential interest rate rise. She said that her own preference “would be to be able to proceed to tighten in a prudent and gradual manner”. She cited improvement in the labour market and the broader economy as reasons for her positivity.

ECB President Draghi also spoke yesterday and said that the Eurozone was always proceeding on the assumption that Greece would remain in the Euro. He mentioned that he and the others of the ‘Five Presidents’ of Europe would be looking to further unify over the coming years and that there was a possibility of a shared treasury within ten years.

CURRENCY SNAPSHOT

The most important movements today should be around lunch time as the German Parliament votes on the Greek deal. It is expected to go through despite strong opposition including from within Chancellor Merkel’s own caucus.

Around the same time as the vote the US releases their inflation data with the chief figure expected to fall 0.1% and the core figure to rise by 0.1%. The UoM Consumer Sentiment and Inflation

Expectation results are also expected out in the afternoon which may sway the Dollar late in the day.

Friday 17 July 2015, 10:25am

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