Pound news:
Sterling is leading the way this morning by registering some healthy gains against both the US Dollar and Euro. Unfortunately we must approach the GBP/USD gains with some caution as the rally is not as a result of strong economic data but rather the result of a failed deal. Initially the Pru/AIG deal would require a huge amount of Sterling to be sold for U.S dollars in order to finance the deal, leading to traders shorting the Pound in anticipation. However, now that the deal is no longer going ahead the market is not expecting a large GBP sell order and as such traders are unwinding their Sterling short positions. “The macro data today will probably have little bearing on sterling’s price action, which remains bid on expectations the currency hedge on the Pru-AIA deal will need to be unwound,” RBC analysts said in a note.
Having touched a high today of $1.4767 Sterling is now edging down, currently just above $1.4705. Against the euro the Pound looks to have more of a footing and has now held above €1.20 for this morning having touched €1.2010 in yesterday’s trading. Current trading levels are at €1.2029, an 18-month high against the euro.
On the macroeconomic front net lending to individuals is the main piece of data but this is not seen as ground breaking news for the FX markets.
AIG’s Board Rejects Prudential Plc’s Offer To Buy AIA Unit For Below $35.5 Billion
US Dollar news:
Percentage changes on the day so far are not showing huge movements this morning as the dollar edges higher against most of its traded pairs. Against sterling the dollar is down just over half a percent with current trading levels now off the lows of the year, Sterling at $1.4728 having hit a high of $1.4767 so far.
The euro is bouncing around the $1.22 level, last night it touched a low of $1.2186 and this morning we are seeing it hold at $1.2238 to buy. Trading looks to be on the thin side of things this morning as the euro creeps up on the dollar by only 0.07%. The Canadian dollar has retreated against the U.S dollar as it slips back into the $0.9490 level. The Loonie initially pushed ahead on the BoC’s key interest rate hike but soon lost ground on comments from the BoC that further hikes are highly unlikely. The rate hike did, however, open the door for other commodity lead countries to increase rates and speculation of this has seen Australian Dollar and New Zealand Dollar push higher against the U.S dollar.
On the macroeconomic front the only piece of significant news is pending home sales at 15:00 London time. This is seen as a key marker to economic activity as the home sale will generate other avenues of revenue such as mortgage sales and home furnishing sales.
Wesbury Says U.S. Economy Is in `V-Shaped’ Recovery
Euro news:
An interesting article yesterday revealed that a leading U.K economic think tank/consultancy has advised that the only way the Greeks can escape their debt burden is by defaulting and leaving the euro. They also suggested that Spain and Portugal will have to follow suit in order to regain control of their debt mountains.
To make matters worse the jobless rate in France rose to 10.1% in the first quarter as unemployment in the eurozone climbed as a whole. Downward pressure on the euro is likely to continue as spending cuts play their part in stifling growth of any sort. Yet as the euro continues to slide against the dollar the ECB, namely Christian Noyer, suggests that “The present exchange rate of the Euro vis à vis the dollar is close to the average of the last 10 years. So it is by no means an extraordinary level”. For the last week we have seen the euro bounce between high $1.21 levels and low $1.23 levels, currently at $1.2214 it is likely that this trend will continue until we receive some highly damaging news that the market is not already aware of.
In news this morning the German government has extended its ban on short selling, the ban itself was not entirely well received by the market and many questioned the effect of the ban. Either way, the ban continues.
CEBR’s McWilliams Says Euro’s Collapse `Matter of Time’
Quote of the Day
“Don’t be too timid and squeamish about your actions. All life is an experiment.” – Ralph Waldo Emerson
