YESTERDAY’S fourth quarter GDP figure for the UK was uninspiring. The main casualty was sterling. In just two hours following the announcement sterling-US dollar had dropped by 100 points, extending a decline that has been in place for the past week. But sterling could have fallen too far. There are still plenty of events that could put downward pressure on the US dollar in the short-term, for example the FOMC meeting this week, Barack Obama’s State of the Union address and Fed chairman Ben Bernanke’s re-election vote on Friday. Any negative sentiment towards the US dollar could spark a bounce back in the pound. IG Index sterling-dollar quote is $1.6110-$1.6113.
Commodity currencies have all depreciated in line with weakness in the commodity markets. The euro has fallen nearly 30 percent against the Aussie since the end of 2008, and it could be time for a rebound. Looking at the charts for euro-Aussie, 1.53-1.58 region is a historic support line for the currency pair, and technical analysts are expecting a short to medium term rally form these levels. FairFX is quoting a market price of Au$1.5697.
Despite the fact that interest rates could rise in Australia, the economic fundamentals are beginning to look weak: the housing market is looking like it will overheat and consumption is slowing. Growth in Asia should outstrip that of Australia in 2010-2011 and Singapore is a good play on that call. Currencies Direct is quoting a market price of: Aussie dollar-Singapore dollar of Sg$1.2561.
The New Zealand dollar continues to be a adversely affected by the return to risk aversion in the financial markets. The kiwi tumbled to a low of US$0.7023 against the US dollar yesterday. There could be more volatility for the currency over the next 24 hours as the Reserve Bank of New Zealand is scheduled to announce its interest rate decision on Wednesday at 8pm UK time. New Zealand’s central bank has been noticeably less hawkish in recent weeks. Since the interest rate differential is a key driver of kiwi strength, if the central bank seem less likely to raise interest rates in the medium term then this should weigh on the currency. Spreadex has a Kiwi-US dollar quote of: $0.7090-$0.7096.