The pound closed in New York last night at $1.4850 after a volatile session which had seen the rate rally to an intraday high of $1.4984 on the initial reaction to US CPI release, only to reverse sharply to $1.4852 before drifting further through the US afternoon to a low of $1.4843. In the Asian trading sessions, Cable was pushed even lower and touched below Mondays lows at $1.4840 to take the rate to an extended pullback low of $1.4831 before a slight recovery took Sterling to $1.4877 before another drop to $1.4854. We have however seen some fresh demand in the early European sessions as GBP/USD hit 1.4895. Yesterdays release of flat UK CPI data has been keeping an underlying negative tone to sterling, though reported comments from BOE Monetary Policy Committee member, Nemat Shafik suggested that if you took out low oil prices and the relative strength of the pound, from the inflation equation, core inflation is not that low.
Euro-dollar opened in Asia at $1.0924 after European and US markets witnessed a choppy $1.0891 to $1.1029 range. The Asian market was largely in consolidation mode, with euro-dollar slipped to a low of $1.0901 but ran into rumoured demand from below that, cited at $1.0880. A decent recovery followed with the pair then rebounding to $1.0929 before it stabilized. Another fresh move higher was seen in the late morning, with euro-dollar then hitting a high of $1.0938. The next hurdle for the euro will come from German IFO business climate data, set for release during the European session at 0900 GMT and the German ZEW Indicator of Economic Sentiment which is scheduled for 10:00 . Any chance for a brighter macro trend for the Eurozone continues to rest heavily on the state of the German economy and today’s business survey update will determine whether to keep any optimism in check or not. Europe’s growth engine has revved up a bit more this month, according to yesterday’s flash estimate of Markit’s Composite Purchasing Managers Index (PMI) for Germany. Private sector business activity increased at the best rate since last July. Key factors include “an improving economic environment and stronger demand from both domestic and foreign markets said an Analyst from Markit.
The dollar was a tad lower against the euro and the yen in quiet Asian trade Wednesday, with investors reluctant to take strong positions amid a lack of fresh market-moving news. Against the yen, the dollar was at Y119.62, compared with Y119.74 in New York. Despite its weakening to as low as Y119.56 midday, the greenback’s downside was well supported with dip buying kicking in from corporate investors linked to their commercial trade settlements ahead of the March 31 book closing. With adjustments away from a higher dollar trend seemingly coming to an end following the Federal Open Market Committee, the market seems to be finally running short of incentives to be ultra bullish on the dollar. The Dollar Index, a measure of the dollar against a basket of major currencies, was down 0.02% at 86.78.