Pound news:
A slight rally has been forthcoming from Sterling against both the dollar and the euro but the current levels are still not anything of great significance. Against the euro the Pound is trading at €1.1595 which is equates to a 0.84% gain for the day but not testing the mid €1.16 levels. For the last few days the Pound has settled in this region, roughly two and a half euro cents off the year’s highs. Likewise against the dollar, the Pound is now some way clear of the $1.42 lows but at $1.44 it is still performing relatively weakly.
How much momentum this GBP/USD rally has will be interesting to watch as the immediate cause of the rally has been attributed to traders unwinding their Sterling Short positions. This has the immediate effect of boosting the currency but the long term consensus still puts Sterling under pressure. The date to note in your diary for this week is tomorrow, specifically at 09.30 London time when Revised GDP q/q is announced. The market is looking for 0.3% growth and it is highly unlikely they will not tolerate anything less. A slightly weaker number will put Sterling under a lot of pressure but it will take a substantially higher number for the Pound to climb versus the dollar.
US Dollar news:
By close of play on Friday the dollar had lost some ground from both euro and Sterling. By Friday afternoon the dollar was trading in the mid $1.43 levels but a late Sterling rally saw the Pound climb to $1.4418. This has continued as the Pound is 0.33% higher on the day today currently at $1.4505 at the bid.
The euro also entered the weekend on the front foot but has started the day at $1.2492, down 0.62% on the Greenback. A research note from UBS has suggested that the dollar is likely to become a “growth currency” over the next ten years as the US economy is likely to outperform both Europe and Japan. This will give the dollar long term strength as investors and money managers look for favourable returns from the currency. As it stands the dollar is seen very much as a safe haven currency, performing well only when investors are risk adverse.
For the mean time analysts are still concerned about the global recovery and as such the US Dollar remains strong, the Canadian dollar now trading down at $0.9470 and Japanese Yen also on the back foot at 90.30 to the dollar.
This morning is a fairly quiet day for the US, Existing Home Sales out at 15:30 London time.
Euro news:
A bank holiday in France and Germany is likely to keep the euro quiet today, which may give the single currency a day’s rest as the sentiment is still very much on the negative side of things.
The news this morning is that a number of powerful hedge funds are not shy in announcing their strategy for shorting the euro. This saga should be entertaining to watch as there are two very clear players on either side. Speculators are almost certain the euro will fail and have bet accordingly, whereas EU finance minister are convinced that the euro remains structurally sound with no cause for (serious) alarm. “If Germany can’t get its act together and realize what’s at stake, then don’t expect the rest of the euro zone to,” said Geoffrey Yu, a London based strategist at UBS AG, which cut its year-end forecast for the euro to $1.15 from $1.30 on May 13. “It’s very difficult to have any faith in euro-region policymaking.”
This morning sees the speculators holding the advantage as the euro is down against a vast majority of its traded pairs. EUR/USD is now testing the $1.2440 level and the commodity lead currencies are fighting back with the AUD, CAD and NZD up on the euro this morning. The euro is now testing session lows against both the dollar and the Yen.
Albright Says Euro Zone Has `Serious Structural Problem
Quote of the Day
“If you don’t know where you are going, how can you expect to get there?” – Basil S. Walsh
