US Dollar news:
The US has continued to weaken against the pound this morning on speculation that today’s non-farm payroll data will show a weak reading highlighting continued stress in the US economy. This sentiment in the foreign exchange markets has seen a negative impact for the USD across the board seeing multi-month lows against the yen and its weakest level against the Euro since May.
In further concerns for the US economy, the US housing market appears to be heading south again in line with the expiration of a lucrative tax credit for buyers as increased uncertainty shatters homebuyer confidence. The sudden weakness in residential real estate has struck nearly every region of the country, according to recent government and industry data, driving down sales of new and previously owned homes in May.
Pound news:
The pound is continuing to trade within the 1.21 area against the euro down from Tuesday’s high of 1.2395 as the Euro gains some “breathing space”. The Euro has managed to make a recovery of over 200 points throughout the course of this week as investors rebalanced short positions at the end of the first half of 2010. The Euro has also been helped against the pound by euro zone funding operations, suggesting that liquidity problems facing banks in the region may not be as bad as initially thought.
In most recent economic data for the UK, construction PMI which came out at 9.45am this morning was slightly under expectation at 58.4 against 58.6 forecast. The market will now look out for Halifax house price data, service sector PMI and manufacturing production data all out by Thursday next week.
In a fresh outlook by the Bank of England, a recent survey shows households must brace themselves for a return of the credit squeeze, with mortgages being far harder to obtain in the coming months. According to this survey banks plan to lend out less to homeowners for the first time since the start of the credit crunch. It appears whilst the pound is currently ahead of the Euro in terms of attractiveness, the UK economy still has further twists and turns to come on the road to recovery.
Euro new:
The Euro has been making some decent gains in the last few days particularly against the USD trading back into 1.25 in addition to gaining 200 points back against the pound. The Euro has benefitted from some renewed confidence in the Eurozone and its fiscal situation, although this is still very much an unresolved issue.
Concerns over the US economy have also provided the Euro with a perfect opportunity to take advantage of a weaker USD with worries continuing to persist over a US economic recovery. “The (currency) markets’ relief at a successful Spanish auction has boosted the euro in the short term,” CMC Markets Analyst Michael Hewson said. “However, any upside will continue to remain limited while concern over solvency of European banks continues to weigh on the market.”
Quote of the Day
“Work spares us from three evils: boredom, vice, and need”. -Voltaire
