Euro news:
As previously mentioned the euro has been ticking lower over the last 5 days against the U.S dollar as fears of a double dip recession gives the single currency a sell bias. However, a research note from BNP Paribas has suggested that having held above $1.2734, a major support level, the currency could bounce back to $1.2905; a breach of that level would then signal a move to $1.3105 followed by $1.32. Yesterday’s “low is bouncing off two strong medium-term support levels,” Andrew Chaveriat, a New York-based technical analyst at BNP Paribas wrote. “Two reasons to expect a multi-day rebound.” A quick look at the market shows that the euro is now trading 0.50% higher on the dollar and looking to test $1.29. Generally speaking the euro is trading higher in the FX markets, the moves higher are not particularly large but confidence in the single currency often sets the tone for the global outlook. The fact that the euro is trading higher against both the safe havens of the JPY and CHF signals a bias towards risk on for this week.
Against Sterling the euro seems to be on the front foot as negative sentiment for the Pound sees the euro take the lead. News in of a Spanish bond auction reveals some very strong results, appetite for Spanish debt up from the previous auction.
Pound news:
Sterling experienced a rally yesterday as GBP/EUR touched €1.2213, subsequently Sterling has gradually moved lower over the course of this morning as we now find the Pound at €1.2148 on the market and down -0.48%. Nevertheless, a hold above €1.2150 should be viewed as positive having traded at €1.19 for much of this month as well as the end of July.
Against the U.S dollar we are witnessing less activity as trading so far reveals a -0.12% move for the day. This takes GBP/USD to the $1.5650 region although Consumer Price Index data is due at 09:30 London time. This is a very important event as inflation has been a hotly contested topic of late as recent figures show inflation to be above the BoE target of 2%. The outcome of the data will be key to forming monetary policy but the current forecasts of a move lower from 3.2% to 3.1% suggests Mervyn King will argue that tighter monetary policy is not yet needed as CPI is already on a downward track. The markets seem to be concerned about the upcoming data as Sterling is now trading down against the majority of its major pairs, the Australian dollar in particular benefitting by climbing 0.50% to trade at $1.7348 having traded at $1.7483 earlier today. How Sterling performs
today, and for the rest of the week for that matter, is likely to be shaped by the outcome of the CPI data.
UPDATE : Inflation Down But Still Above Govt Target
US Dollar news:
The dollar remains relatively unchanged against the Pound as the percentage change for the day ticks in between 0.00% and -0.10%. The current price on the market at $1.5662 is a slight revision higher from last week when it dipped to $1.5563. Against the euro the dollar finds itself down -0.36% as the euro bounces back from a five day losing streak. The euro is poised to bounce back to $1.32 according to BNP Paribas, more of which later. Yesterday there was little to move the dollar although the TIC Long Term Purchases showed that foreigners investing in U.S assets outstripped U.S citizens investing in foreign assets. This gave the dollar a boost as it shows there is still some faith in the U.S economy despite signs that the second largest economy behind China is slipping into recession.
This morning sees the commodity currencies on a slight rally, AUD, NZD and CAD are all showing positive gains although no currency has made substantial gains thus far. CAD is trading at $0.9611 and 0.30% higher but trading looks to be on the calm side today. Today we have building permits to look forward to at 13:30 London time followed by Producer Price Index, both of which will be closely reviewed given the fragile nature of the U.S economy.
