Daily Currency Update

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Further support for sterling with buoyant data

GBP - British Pound

Sterling received another boost yesterday after a CBI industrial survey came out in line with expectations. Business optimism and investment intention was very much on the rise, which again supported the argument that the Bank Of England may not now increase interest rates in their January meeting. Market futures are now pricing a 55% chance of a rate hike at the end of January, down from 60% on Tuesday. The Flash PMI data will now be watched on Friday, and a weak figure there could push things in the other direction again. This also provides temporary respite for the pound as a rate hike is still fully priced in by May.

Key Movers

Though the ECB meeting today is due to provide few surprises, its important not to consider today as a complete non-event for the Euro. Christine Lagarde could provide some decent forward guidance about the path ahead and the ECB's role in smoothing the rocky road that the Eurozone faces with Brexit negotiations and impending tariffs from the Trump administration. The ECB were uncharacteristically hawkish in their December minutes, providing an argument that negative interest could have some damaging side effects to the Eurozone economy. "Green shoots” in the economic data and the potential for further upside in core inflation could spark talk about shifting the balance of risks facing the eurozone from tilted to the downside to “neutral” fairly soon.

All eyes will also be on Eurozone consumer confidence figures due out this morning for further signs of the theory that the region is seeing some 'green shoots'.

The China coronavirus continues to grip the global economic scene, with 17 now dead and many more infected. The Chinese authorities have suspended planes and trains in and out of the city of Wuhan which contains 11 million people, as well as buses, subways and ferries in order to try and contain the spread of the virus. Residents have been told not to leave. Worried about a food shortage, one said it felt like "the end of the world". Markets are reacting interestingly to the news and the USD has seen some of its safe haven status return with some strength on the back of the developments. With the Chinese new year and the February break around the corner, this throws in another dimension for the USD and local Yuan currencies.

Expected Ranges

GBP/USD: 1.3080 - 1.3190 ▲

GBP/EUR: 1.1800 - 1.1890 ▲

GBP/AUD: 1.9070 - 1.9230 ▲

GBP/CAD: 1.7210 - 1.7380 ▲