Pound news:
To start with the better news, Sterling hit a two month high against the dollar, registering $1.5241 the highest since May. We have subsequently moved lower in this morning’s trading to rest at $1.5171 for the time being but there is plenty of action today to see GBP/USD fluctuate.
At 09:00 we have the Halifax House Price Index followed by manufacturing production at 09:30 this is then followed this afternoon by a raft of interest rate data. No doubt rates will be held where they are but traders will be more focused on what the MPC has to say on the outlook for the U.K. Any slight hawkish comments and we’d hope for a rally from Sterling against both the dollar and euro. Unfortunately for the time being, GBP/EUR is doing very little.
Trading is in very tight ranges and €1.1994 is currently the low of the day. A slip below €1.20 will disappoint most who were banking on holding above the €1.22 levels we saw last week. Sterling may find it hard to push higher as the results from the EU bank stress test are likely to reveal good news.
The strong employment news from Australia has severely dented GBP/AUD. Coming from AUD$1.8122 last week we have now slipped to AUD$1.7357 today, down -1.20% for today alone. Apart from the Swiss Franc, Sterling has opened lower against the majority of its traded pairs, possibly a precursor for weak data this afternoon?
US Dollar news:
The U.S dollar is showing little change against the Pound as there is insufficient news to drive the dollar higher. As of late the U.S has produced a string of disappointing data forcing the dollar lower as investors now shift to the Yen or Swiss Franc for safety. Trading for the day shows the dollar up on Sterling by 0.10% but the current price on the markets of $1.5174 is just one pip lower than 16:30 yesterday.
Against the euro the dollar is losing even more ground as it slips to $1.2643 from $1.2598 yesterday, the high of the day so far showing an impressive $1.2686. There was very little news to help the dollar move higher yesterday and today unemployment claims at 13:30 is the only real potential market mover. The market is looking for a reduced figure of 461,000 but as of late figures have been coming in worse than expected.
The Canadian dollar is little changed on the day but has slowly crept into the mid $0.95 level as market sentiment improves. Off the back of very strong employment data the Australian dollar has gained over one percent in trading today. Generally speaking the dollar is under a bit of pressure as equities pick up, encouraging investors to move back into riskier assets.
Euro news:
The euro is performing relatively well in the FX markets as the attention has shifted away from huge sovereign debt levels, that are still there by the way, to the bank stress tests. Many have questioned the stress test, suggesting it is far from rigorous, furthermore EU finance ministers are hardly likely to allow for damaging news to emerge. “The trade-off facing the regulators is to make the tests tough enough to be credible to the markets but not so stringent as to cause many banks to fail,” said analysts at Barclays Capital. So far the markets have reacted well to the stress tests, consequently pushing the euro higher against the dollar. New highs of $1.26 will be severely testing those who have shorted the euro. If traders then start to re-adjust their positions we could see the euro move higher as traders trim their losses.
A snap shot of the market reveals Sterling is gradually ticking lower this morning, €1.1960 is now a target to the downside, whilst $1.2665 is the upside target for EUR/USD. Analysts at BNP Paribas said $1.2675, last reached in mid-May, remains a key technical level for the common currency. If the euro can break through that ceiling, it could breach $1.30 in the coming weeks.
Quote of the Day
“This above all: to thine own self be true”. – William Shakespeare (Hamlet (Act I, Scene III)).
