Against the dollar Sterling remained range bound, dipping momentarily to 1.5289 then recovering to 1.5403 before settling around the 1.5340/50 level for the afternoon session. The morning session saw a strong start for Sterling after better than expected figures showed inflation had passed the 3.0% level reaching 3.4%. This fuelled speculation that the BoE may raise rates in order to curb inflation. Unfortunately this excitement faded during the day as most of the gains fell away as the day progressed.
Sterling has had more staying power against the euro having broken into the 1.14 level and holding firm throughout the day. This morning sees more of the same as the pound buys €1.1446 having reached a high of €1.1463. Today sees a number of macroeconomic data releases of varying importance. One to look out for is the claimant count change which shows the change in the number of people claiming unemployment-related benefits during the previous month. Analysts are expecting another set of strong figures which, if achieved, should see Sterling test some resistance levels against both the dollar and euro. Figures just out gives mixed signals, unemployment up to 8% but those claiming benefits is actually down. Things relatively unchanged thus far in the markets.
US Dollar:
The dollar was broadly down yesterday as the safe haven status subsided on the back of strong equity earning. Apple shares shot 8.3% and Goldman Sachs posted earnings per share of $5.59, well above analysts expectations. Whilst risk aversion may not have spread to the eurozone just yet, investors are keen on higher yielding assets within the U.S. Against the dollar the commodity lead currencies strengthened on the back of an improved global outlook for growth.
Yesterday the Canadian dollar touched parity with the Greenback having dropped away for the last three weeks. This morning it has held firm, buying $1.0053 up 0.41% on the day. Canadian dollar strength comes off the back of speculation that the Bank of Canada is about to start lifting rates. However, speculation can be short lived and investors will be watching closely to see if the Loonie (CAD) has the momentum to stay above $1.00.
The Australian dollar is steadily climbing against the Greenback up 3.83% on the year and 0.25% for the day. EUR/USD was relatively unchanged staying very close to the $1.34 levels. It starts the day today at 1.3434, down 0.01% from yesterday.
Euro:
We are relatively unchanged on the euro front with the theme being general weakness across the board as the same problems persist. This morning sees no noteworthy falls so far, holding steady at around 0.10% down against it major pairs. No macroeconomic news for the eurozone today so movements will be driven by other currencies. The airspace is now beginning to open up which will allow EU members to restart talks on the current Greek debt crisis.
In the bond market, which acts as a very clear indicator of market sentiment towards sovereign debt, we are seeing the same story as yield spreads on Greek bonds remain high. An interesting article in the Telegraph highlights that the IMF is now very concerned about sovereign debt levels. It is surprising that they comment on this now seeing as debt has always been the very large elephant in the room but nevertheless the projected debt levels and debt servicing requirements point to another financial crisis similar to the banking
crisis.
Quote
“No matter how far you have gone on a wrong road, turn back.” – Turkish proverb
