Euro news:
The euro ends the week by catching a lot of people out in pushing ahead to $1.2934 on the market. Not so long ago bank after bank came forward with their suggestions for EUR/USD, all of them targeting $1.15 or lower. It will be interesting to see whether or not they are right at the end of the year and also whether or not they have conviction behind their original forecasts.
The core problems still exist so one particular wobble could see the euro tumble again but for the time being the market is content with the measures put in place to support the single currency. Obviously, all eyes will be on the stress test results but so far so good for banking capital requirements. “People are looking at all the measures the Europeans are putting in place,” said Chris Turner, head of foreign exchange strategy at ING Financial Markets in London. Those measures have calmed investors, he said. For the time being this will support the euro but this may come at a price for those selling Sterling as GBP/EUR price edges ever lower, -0.13% down for the day.
Pound news:
As previously mentioned the divergence on GBP/USD performance and GBP/EUR has been an interesting thing to watch. This performance difference is now even more evident as Sterling fails to hold on to €1.20 but surges to $1.54.
Starting with the euro, Sterling appears to be suffering as concerns with the single currency are subsiding. €1.19 seems to be the level that traders and investors are happy with. Looking back over the past month Sterling has moved into €1.20 but has edged down in overnight trading. So far Sterling has maintained the €1.19 area but the current price and low of the day €1.1925 is moving worryingly close to €1.1890.
Against the dollar on the other hand, Sterling has rallied hard to move back to levels we are more comfortable with; $1.5439 is nothing new but shows a positive move from the lows seen post election. This current price should be maintained by Sterling as we are not testing any yearly highs, however, “There is no real trend to speak of, but
more people were willing to buy up the pound,” one London-based trader said. Rallies with no real reason for support often move back sharply as traders take their profits. One possible suggestion for the GBP/USD rally is that Sterling is finding strength off the back of the new found confidence in the euro, putting global concerns at ease. This would definitely explain the difficulty the Pound has had in making gains on the euro.
US Dollar news:
As we head to the weekend a look back sees that this week has been particularly bad for the dollar against both the euro and Sterling. Having started against the Pound at $1.5014 on Monday the price on the market of $1.5443 shows a tremendous 4 cent move for the Pound.
This morning sees the dollar edging ahead but a gain of 0.17% still sees GBP/USD trading above the $1.5420 level. The euro has also had a stellar week breaking through resistance level after resistance level to reach $1.2948. If this momentum can be maintained then $1.30 may be re-visited but the weekend may see traders take profits thus pushing the euro lower. It has also been a volatile week for the commodity lead currencies, as market sentiment shifts so too does AUD, NZD and CAD, all very sensitive to threats of a global slowdown. AUD came under particular downward pressure when China, the biggest consumer of iron ore, announced they would be cutting back on their output.
CAD has seen $0.97 versus the dollar this week but this morning sees $0.9615 and -0.13% down on USD. Generally speaking the dollar has come under pressure from a string of weak data “Thursday brought a terrible cross-section of data,” said David Semmens, U.S. economist at Standard Chartered Bank in New York. “This clearly points to a slowing in activity and a very weak start” in the U.S. for second half of the year, Semmens said. The U.S may find a saving grace in CPI data or TIC Long Term Purchases but the trend so far would suggest it’s a long shot.
Quote of the Day
“The only real mistake is the one from which we learn nothing.” – John Powell
