The path of least resistance for the single currency has been lower through most of the month and that was especially the case yesterday. The euro was down 1.4% over the day, with a push below the 1.07 level seen towards the end of the session. Equities were also weaker across the board, with bond yields once again being crushed, which added to the weaker currency tone. The move is a combination of a strong dollar, with the euro looking the most likely candidate against which to go short, given the diverging underlying policy paths. Note that ECB President Draghi is due to speak today, for the first time since the start of QE.
Sterling was also notable, moving above the 1.40 level on GBPEUR (the preferred UK cross). Further momentum could be gained today if we see production data firmer than expected at 09:30 GMT, where expectations are for a modest 0.2% MoM gain on the production series. The move higher in sterling last month towards the 1.55 level on cable is unlikely to be repeated though, with the move coming independent of rate spreads and also data trends. Elsewhere, note that the RBNZ interest rate decision comes overnight, the New Zealand central bank having moved to a neutral stance in their statement at the end of January. We don’t expect to see a move lower, with New Zealand not under the same pressures as other central banks. But the kiwi has been weakening and is not far from the year’s low at 0.7177.