US Dollar:
The Dollar remains weaker amongst the currency markets trading into 1.51 against the USD and 1.66 vs. the pound. The main economic data release yesterday was ADP non-farm employment change which came out worse than the expected – 149k and –169k. This data highlights the estimated change in the number of employed people during last month (excluding farming and government) therefore highlighting continuing pressure on the US employment market. In more recent news and helping to demonstrate signs of economic recovery, Bank of America (the US’s biggest lender) has confirmed it will repay $45 billion of US government bailout funds. This afternoon sees the release of further unemployment data this afternoon with unemployment claims due and Fed chairman Ben Bernanke testifying. Expect the prospect of further USD weakness in the short term.
Pound:
Sterling has started to weaken in the last half an hour after service sector data came slightly under the expected 57.1figure at 56.6 but is continuing to highlight expansion (above 50) in the sector. In general news reported in the Times newspaper an influential group of European economists forecast UK growth of 1.7% in 2011 in contrast to forecasts of 3.25-3.75% by the UK treasury, some would say an over optimistic expectation. The subject of growth is a big topic surrounding the UK economy at the moment as we continue to bounce around the bottom amongst negative GDP figures. Sterling’s recent gains after matters have calmed temporarily over Dubai is expected to be short lived with continued economic and political problems for the UK likely to hamper any strong recovery for the pound in the medium term. The fact remains that UK banks are still the most exposed to Dubai with RBS being highlighted as one of the main lenders today. The UK could still suffer if there is any suggestion that Middle Eastern banking intuitions need to liquidate U.K. holdings as a result of a fallout from debt restructuring. This could not have come at a worse time when recent economic data highlights that the U.K. economic recovery is way behind other major economies. There is no further economic data due this week apart from Halifax house price data which will be released anytime between 4th and 7th of December. Expect sterling to remain vulnerable due to lack of support and any firm reason to trade higher.
Euro:
The Euro received a boost today after positive U.S data led to a brightening outlook on the global economic recovery and prompted traders to move out of the dollar into the single currency. Rhetoric from Germany’s Economy Minister Rainer Bruederle that Germany ‘faces a new credit crunch’ held back the euro from further gains though. Sterling held its ground against the single currency as well as no tangible data was released in the U.K allowing GBP to hold steady and extend its gains. The European Central Bank meet later today with an expected interest rate decision of no change at 1%. The talks will focus on whether monetary easing to boost the economic recovery is required, as well as the fallout from Dubai and how it will affect European countries. The rhetoric should move the Euro depending on its tone. GBP/EUR steady for sterling at 1.1014, EUR/
USD shows Euros strength at 1.5115.
Quote of the Day
“Take risks: if you win, you will be happy; if you lose, you will be wise.” – Anon.
