Pound news:
Sterling did take part in quite an impressive rally yesterday namely against the euro, climbing to €1.1871 a high of the year. It has subsequently come down from that level to trade at €1.1748 which is still a respectable level given where GBP/EUR prices have been so far this year.
The US Dollar also surrendered to a Sterling rally with $1.46 a possibility, unfortunately this level was not tested and Sterling retreated back down to the mid to low $1.45 level. The emphasis is still on Sterling weakness so traders and investors would have viewed the rally in the Pound as a chance to profit take on a short term long position on the Pound. The majority of those betting on Sterling will be taking a short position.
The one piece of U.K data, CBI Sales, was way lower than market expectations coming in at -18 versus a forecast of 13. CBI is a survey of about 160 retail and wholesale companies which asks respondents to rate the relative level of current sales volume. This poor figure shows weak consumer spending which may have put a cap on the Sterling rally. There is no news for the U.K economy today and going into a long weekend suggests the markets might be fairly calm today.
US Dollar news:
The dollar is marginally up on both the Pound and the euro this morning, however, the current buy prices for both currencies are still off their worst levels. Sterling is down by 0.49% but has maintained above the $1.45 level for the time being. The high of the day shows the dollar slipping to $1.4591 to the Pound but we are some way off that level right now. The dollar is also up on the euro however the days change is just 0.20% so far and the euro is holding above the $1.23 level for the time being. Over night the euro did slip to $1.2282 however this did not trigger any rush sell-offs and so the euro has regained lost ground to trade at $1.2334.
The Canadian dollar also appears to be recovering some lost ground as it has just pushed into the $0.95 level against the dollar, whether it can hold this level remains to be seen.
On the macroeconomic front yesterday was not a great day for the U.S as both GDP q/q and unemployment claims came in weaker than expected. GDP was 3.0% with the market looking for 3.5% and unemployment claims were 460,000 up 10,000 on market forecasts. This was obviously disappointing but the overall drop in the dollar was not that extensive. There is further data this morning such Personal Spending and Personal Income however this is not viewed as being of huge importance so we may see some moderate volatility as the U.S markets open.
Euro news:
For some time the falls in EUR/USD were not relative to falls in
EUR/GBP. Most were expecting euro weakness to be evident against Sterling, however, this was not to be the case as Sterling hovered around €1.15 to low €1.16 at interbank. Yesterday was possibly the first sign that the euro is under pressure from all angles as the Pound pushed on to unchartered territory for 2010. These new highs have not been sustained but we could be starting to see a trend of euro weakness against the Pound. In a research note Morgan Stanley put a price of $1.16 for the euro by the end of the year. “The initial fiscal problem in the periphery (Greece) has now become a fiscal problem for core Europe,” Morgan Stanley’s Stephen Hull in London wrote in a report today. “More importantly for the euro, it has also undermined the credibility of the ECB.” He goes further to suggest “We see the dollar being well supported for the remainder of 2010, U.S. growth is still surprising on the upside.”
Yesterday revealed that there was only one vote difference in the Spanish parliament vote on proposed austerity measures. The market was expecting the plans to be passed, which they were, but the margin was as tight as it could have been. Unfortunately this will inevitably lead to strikes in Spain leading to political and social unrest.
Quote of the Day
“Remember, people will judge you by your actions, not your intentions. You may have a heart of gold – but so does a hard boiled egg.” – Anon.
