Euro news:
No one is too sure how this Euro crisis is likely to end given that most of the analysts and investors are sure that it is destined to fail yet EU ministers are saying quite the contrary. What is clear is that the bailout has bought Greece some time, but little else. Furthermore, the idea of a single economic government to control all single currency member states simply won’t happen. The proposal would mean that each country losses its control of fiscal policy and therefore becomes a state and not a nation.
The E.U ministers are fast running out of options to keep the euro afloat. In the mean time, the weak euro has not been of too much concern for the finance ministers. With summer approaching, the relative weakness of the euro will give the region a sizeable injection of cash through the tourism industry. Many of the countries that have the worst budget deficits are also the same countries that are desirable to visit, namely Greece, Spain and Portugal. “Unless the decline in the euro starts to spiral out of control and as long as the ECB views its decline as being orderly, the central bank won’t try to intervene regardless of the currency’s levels,” said Koichi Kurose, chief strategist at the unit of Japan’s fourth- largest banking group in
Tokyo.
Pound news:
Concern about the U.K economy is the order of the day as Sterling dropped to a 13-month low against the dollar as it appears that as a nation we have no money left. In a kitchen sink approach George Osbourne has vowed to air the dirty laundry after the new government accused Labour of fixing fiscal forecasts. The strength of this accusation is yet to be determined but either way it will do Sterling no favours. Analysts are now watching to see just how quickly the government can cut its deficit.
Minor rallies from Sterling have occurred but unfortunately the downward pressure still remains. As such traders are taking their profits by selling on rallies and, perhaps hesitantly, buying on falls.
Against the euro the Pound has held its ground somewhat in the €1.17 area. This morning sees Sterling come away from that level, currently trading at €1.1675 to buy registering 0.01% change for the day so far. As I have said before both currencies are experiencing problems so there is little reason to buy or sell the GBP/EUR pair. A longer term view still shows Sterling as the better option as current trading levels are nearer the highs of the year than the lows.
Inflation data out at 09:30 is likely to move the markets as the forecasts are above the 3% threshold. If this is to be the case then points from the BoE inflation letter will be of great interest to traders and analysts.
Update: UK inflation hits 17-month high
US Dollar news:
All eyes are on the EUR/USD pair as the euro continues to fall versus the dollar. Yesterday the euro hit a four-year low of $1.2235 however many traders were looking for a rally back off this level yet this never materialised. As such investors and traders are sticking with their short positions. The discussion has now turned to whether or not the euro will hit parity. A poll in the Evening Standard showed that 74% of those asked thought that parity would not be reached.
This morning the euro has recovered to $1.2389 but the downward pressure still remains. Against Sterling the dollar retained its dominance as the Pound failed to get above $1.45.
Asian trading proved highly detrimental yesterday as the Pound hit $1.4249 before recovering to $1.4509. This morning’s trading is tight with Sterling marginally down 0.10% at $1.4461. Levels against the Canadian dollar remain in the $0.9724 region, there is little to push the Loonie higher considering the relative strength of the U.S economy right now. On the macroeconomic front 13:30 sees building permit numbers out, an indicator of the number of applications made to build homes for the previous month. A big number here and we can expect US Dollar to make some gains.
