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A standout in yesterday’s trade was the pound, which surged against the greenback on the back of some encouraging jobs numbers. The pound shrugged off the disappointing CPI reading in the previous session and rallied as the claimant count change dropped by much more than expected (-41,700 versus -33,200), while the unemployment rate fell to 7.6%. BOE Governor Carney signalled a rate increase is possible in 2015 as the economy recovers ‘robustly’ and inflation slows. GBP/USD rallied back above 1.60 and managed to print a high of 1.605. The BoE is targeting a drop in the unemployment rate to 7% in the third quarter of 2015, and as long as it remains on track to achieve this then there is room for the pound to rally further. Near-term resistance is at 1.61, which is near the highs from earlier this month.
The pair has been consolidating around 99.40, with no real catalysts to drive it ahead of Janet Yellen’s testimony. However, we have seen some movement early in Asia as some of her comments hit the wires. Yellen said unemployment is still too high and inflation is running below the Fed’s 2% goal. This has prompted the market to feel her testimony tomorrow will be dovish. As a result, there is further US dollar weakness, and USD/JPY dropped to a low of 99.12. With Japan’s GDP due out at 10.50 AEDT this morning and Ben Bernanke set to speak at 11.00 AEDT, then the pair could be in for some volatility today, and in turn the Nikkei. At 10.50 we also get Japan’s weekly fund flows data where investors will want to see a pick-up in Japan buying foreign stocks and bonds, which would keep the yen on the back foot. Japan’s GDP is expected to be up 0.4%. This translates to an annualised rate of 1.7% and is a sharp drop from the previous reading of 3.8%.
It will be all about GDP readings later today, with a raft of releases due out of the eurozone. We had already seen an improvement in the euro’s performance on headlines suggesting the ECB is considering negative rates. The pair is now approaching key resistance at 1.35 and any signs of disappointment in GDP readings could prompt a reversal.
JHX reported 2Q earnings today with its net operating profit excluding expenses coming in at $56.3 million (versus $50.1 million expected). Its first-half net income was up 31% to $108.3 million and an interim dividend of 8 cents was declared, beating estimates of 5 cents. This might see its stock pop higher at the open, with resistance in the $11 range.