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Daily FX Market Commentary

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The USD

The USD as a whole has been fairly range bound, that is, there hasn’t been a great deal of currency movement over the last few weeks. Sometimes, this could mean that as the currencies trade against each other with little advantage on either side there could be a break either way. Imagine the walls of a dam being pressed….but not being sure which side will surge through.

There remains a great deal to be seen from the election campaigns this year and this will contribute to the shape of analyst impressions for their economic future. Putting the financial aspect to one side, this surely is the most acrimonious debate session seen in many an election, in no small part due to the personalities of those running.

I expect that the USD will continue a muted run today given the lack of any notable data or information expected from the States.

The EUR

The President of the European Central Bank, Mario Draghi, yesterday talked about the tough conditions that faced global markets. In particular, the Eurozone has faced more challenges than other primary markets. The key factor for his agenda is still ‘price stability’ that is, maintaining pressure on inflation – which requires strong demand to operate.

Draghi has said previously that they may review the monetary stimulus package that is in effect currently and how quickly they can transmit money through the economy. He noted concerns that have arisen from oil and other commodity prices.

On the speech yesterday, coupled with some slightly weaker trade surplus data, meant that the EUR traded gently lower.

The GBP

Today a range of economic indicators are due, including a critical item in Inflation (Consumer Price Inflation, Retail Price Index and Producer Price Index). Both of these are particularly important as they give a reflection of the state of demand and price pressure in the UK. If the figure is good, and by good I mean high but not a lot higher than 2%, then we would normally expect a hike in the strength of the Pound. The reason is that strong inflation performance (as long as it’s not too strong) can help underpin an increase in interest rates.

However, there seems to be a consensus that the inflation rate will contract slightly this morning. If you have GBP to sell and a transaction to process to an overseas supplier this morning, perhaps now is better than after 09:30…