Pound news:
Considering the emergency budget is due tomorrow and not likely to paint a rosy picture Sterling is not showing any signs of weakness in the currency markets. Against the dollar Sterling is riding on the coat tails of improved global outlook, having hit am high of $1.4935 for the day so far. It is now trading back in the high $1.48 levels and so $1.50 looks slightly out of reach for the moment, although many would like to see a $1.50 or above level.
The euro is doing well on the improved market sentiment and so GBP/EUR is showing little movement for the day so far, Sterling just ahead by 0.10% at €1.1973. If the euro gets a significant boost from the improved market conditions then the Pound may find breaking and holding €1.20 a little difficult today. Improved retail sales on Thursday gave Sterling a welcome boost and also helped to suggest the worst may be behind us. “May’s monthly public finance figures continue the recent run of slightly better-than-expected news on the fiscal position … But the big picture of course is that borrowing remains extremely high and additional measures to reduce the deficit will be required in next week’s budget,” said Vicky Redwood, economist at Capital Economics.
US Dollar news:
The dollar is weaker across the board this morning as the markets react to news that China will end its policy of pegging the Yuan against the dollar. This means that the Chinese government will let their currency appreciate against the dollar, creating more demand for services and less demand for exports. The move also signals a move to curb the huge growth the nation is experiencing and keep tabs on excessive inflation. As a result risk appetite is up as is general market sentiment, thus investors are moving out of the dollar and back into riskier assets.
The euro is doing particularly well, up 0.44% at $1.2441. Sterling has also moved ahead to trade at $1.4884 and also just shy of a half a percent gain on the day. As a result of the improved market sentiment the commodity lead currencies are making strong gains the U.S dollar, Australian Dollar and New Zealand Dollar are both up over a percent on the dollar by 1.52% and 1.15% respectively. The Canadian dollar is also up, now trading in the mid $0.98 levels, still over 150 cents on parity but slowly edging ever closer. A very quiet day on the macroeconomic front so moves thus far have been driven on the news of China readjusting their currency strategy.
Euro news:
As global sentiment improves so does the euro and the news that China will revalue their currency suggests that the Chinese now believe the global recovery is underway. This has lead to further EUR/USD gains and the current price will no doubt be testing those who have shorted the euro. Futures traders decreased their bets to the least in two months that the euro will decline against the U.S. dollar, figures from the Washington based Commodity Futures Trading Commission showed. Further data also showed that the cumulative number of large speculators such as hedge funds running net-short positions on the euro contracted to its narrowest to 62,360 from 111,945.
In a change from the norm, some positive news came from Greece as Prime Minister George Papandreou said that Greece is ahead of the deficit target of 8.1% for this year and that tax increases are boosting revenue. 15:30 London time sees ECB President Trichet speak. Whilst there is no specific agenda to his speech his position within the ECB is such that his comments have the ability to move the market.
Quote of the Day
“Do not worry about your difficulties in Mathematics. I can assure you mine are still greater.” – Albert Einstein
