Pound news:
The Pound is struggling to come back to levels seen a month ago of around $1.5400. Yesterday was also a holiday in the U.S and as such the market was very quiet. Current trading levels are very much in keeping with where they have been for the last week, the $1.4450 level being maintained with occasional forays into $1.45 and $1.44. A recent driving force for GBP/USD has been the Pru and AIG deal, were the deal to go through then a large amount of pounds would need to be sold to buy the dollars necessary. However, the deal seems to have hit the rocks therefore traders are no longer worried about a large sell order going through the FX markets.
Against the euro Sterling is pushing ahead and very close to testing the €1.1900 levels. The high of the day is €1.1894 and current levels are at €1.1887. As we can see in GBP/EUR and GBP/USD the Pound is very much subject to movements from its pairs. Euro weakness and dollar strength being the driving force behind currency movements for Sterling. It would seem that with no new revelations to come from the U.K the market is very much focused on the eurozone, namely the level of exposure U.K banks have to club med sovereign debt.
Paying back the money wasted on banks / stimulus
US Dollar news:
Both the Pound and the euro are trading lower against the dollar as risk aversion rears its ugly head on threats that we are heading for a double dip recession.
The U.S economy seems to be settling down into a steady pace and so all eyes will be on the fundamentals for currency movements. The U.S will be keen for a strong currency as it will entice foreign investors to buy U.S bonds, however a weak currency will help the many U.S companies with international sales. A measured balance will be required to maintain the best of both worlds.
The dollar is up over 1% on the euro at $1.2176, the euro still hugely under pressure right now. Sterling is also on the back foot down 0.53% at $1.4460. After the long weekend here in England Sterling is little changed from Friday’s close of $1.4481. The euro, however, has fallen almost two cents from a price of $1.2376 on Friday at 16:30 GMT. Interestingly the euro remains 8.6 percent overvalued against the U.S. currency, according to Bloomberg’s purchasing power parity, a measure of the relative cost of goods. This suggests there are further falls in store for the EUR/ USD. Whilst the Canadian dollar starts this morning down against the U.S dollar, the Loonie is edging ever higher. Parity is still some way off but the next level to look out for is $0.96, current levels at $0.9540. 15:00 London today sees U.S data on purchasing manager sentiment, a key marker or insight for the manufacturing industry.
Euro news:
With a Spanish bank downgrade and Italian unemployment showing no signs of improvement the euro was under pressure this morning. Whilst some traders are now looking for a buy point for the euro Gareth Fielding, chief investment strategist at Zug, Switzerland based Quantum Global Wealth Management, still feels there is some way for the euro to fall before buy orders are activated, “There are some complications in the euro area which have stopped us from jumping in until the euro gets closer to what we see as a fair value”.
Ending the month of May the euro notched up its sixth straight month of decline versus the dollar, dropping 7.4% in May alone. The downgrade of Spain from AAA will weigh heavily on the euro, fuelling speculation that the Eurozone may break apart. A break up is the worst case scenario but what is interesting is that the market is primarily concerned by the politician’s inability to get their act together and organise a common policy for the single currency as opposed to raw facts and figures.
News just in, Sterling has pushed through the €1.1900 level, €1.1915 your buy price on the market.
Fitch Downgrades Spain, Casts Doubt on Growth Forecasts
Quote of the Day
“It is better to laugh about your problems than to cry about them.” Albert. Einstein
