Pound news:
The big news is the announcement of the emergency budget at 12:30 London time. Clues as to what is going to be announced have been leaked but there is still plenty for the market to sink its teeth into. Looking at the currencies markets it would appear that either the traders are not too concerned or they are holding off on placing positions on Sterling in the calm before the storm.
In morning trading Sterling has started to edge down against the majority of its traded pairs but the moves have been subdued so far. Against the euro Sterling is trading at €1.1955 down 0.20% and 22pips off yesterday’s price. After China decided to let the Yuan appreciate Sterling rallied as global risk sentiment improved. Unfortunately, the rally ran out of steam as traders remembered the budget was imminent. “For sterling, a relatively tight budget would likely be viewed as good for bonds and perhaps reduce the risk premium on sterling,” said Paul Robinson, head of European FX research at Barclays Capital. Depending on the outcome of the budget, the bearish view on Sterling may be slightly adjusted as technical analysis suggests Sterling could move to $1.5200 having climbed above $1.4850 recently.
US Dollar news:
The U.S dollar is off to a slow start this morning as the dollar is trading within tight ranges against the majority of its traded pairs. Versus Sterling the dollar is down by the smallest of margins at $1.4757 which is a change of 0.02% for the day and a 36pip move from 16:30 yesterday. Similarly the euro is up on the dollar by 0.05% at $1.2317.
Global sentiment dampened after ECB member Christian Noyer said some banks in the 16-nation region are facing funding problems and as such this would have given the dollar some support as the very cautious investors move back into the dollar to protect themselves. NZD/USD is showing no change for the day, the Canadian dollar is up at $0.9775 but the gain is no significant move, likewise AUD; only just stealing a march on the Greenback.
The big macroeconomic news concerning the U.S dollar is existing home sales at 15:00 London time. The housing market is a key marker of economic health and let’s not forget what market caused this global recession. However, today’s figures may be slightly out of line as a tax credit incentive is due to expire at the end of June which would have lead to a flurry of sales in order to take advantage of the incentive.
Euro news:
GBP/EUR seems to be caught in a very tight trading cycle as the price has not moved by any significant amount or in any discernable direction for over a week now. The beginning of the week saw Sterling hit €1.2014 but since then the euro has held the pound to the mid €1.1950 levels. Against the dollar the euro has also held strong at above $1.2300, in the last few days the price has edged down but nevertheless this morning’s price is showing $1.2319 up 0.07% today.
Whilst everyone is aware of the problems that plague the euro zone, comments from Christian Noyer will not have helped ease any downward pressure. Hinting that some euro zone banks are facing funding problems is the last thing that investors would want to hear, just how severe the funding problem becomes remains to be seen. However, the situation does not look too good as the Canadian and Australian dollar is becoming the reserve currency of choice for central bankers looking for alternatives to the euro on the back of deteriorating government credibility.
Quote of the Day
“Time you enjoy wasting, was not wasted.” – John Lennon
