Euro news:
The euro is trading flat against the Pound but over the last two months this has been of little surprise as GBP/EUR trades around €1.20 briefly testing €1.21 whilst on occasion dipping to €1.19. Today is no different as Sterling holds the €1.2080 level. Overnight the euro did slip to €1.2115 but the relative strength of the euro at the moment meant Sterling had no support or momentum to move higher or even hold €1.21.
Despite being weighed down by threats of an impending global slowdown the euro received some breathing room after Spanish and Irish debt was well received by the markets. As countries that are top of the possible default list an oversubscribed bond auction will come as welcome relief. Budget deficit problems within the euro zone have now been swept under the rug and the attention has now turned to the best way to bring the single currency back to competitiveness and efficiency. Unfortunately this has caused a split as Germany is by far and away the economic strength within the euro zone but this has come at a cost to the club med countries. Dealing with budget deficits is one matter but moving on from the crisis towards a well functioning economy is quite another.
Pound news:
The inflation data came in bang in-line with market expectations which means the situation could have been much worse however inflation stood at 3.1% prompting another letter addressed to The Chancellor explaining why the figure is so high. There was no knee jerk reaction in the markets but throughout the rest of the day Sterling edged lower and lower against the vast majority of its major traded pairs as investors lost faith in Sterling. Having traded in the €1.21 level Sterling moved to €1.2077 but recovered to €1.2089 at 16:30 yesterday. This morning sees relatively thin trading as Sterling moves -0.10% lower to €1.2081.
Against the dollar Sterling is trading in the lower end of $1.55, the low of the day sees the Pound bounce off $1.5500 but a fall through to the $1.54 levels would suggest possible further weakness to $1.5480. Sterling is under pressure this morning as the markets wait for the minutes from the BoE. Speculation that there is a 3 way split on interest rates as well as lower growth forecasts has well and truly capped Sterling gains for the time being. 09:30 London time sees the release of the minutes which may shape trading for the rest of the day. As it stands traders are not expecting particularly good news as the Pound suffers in FX, the only saving grace comes against AUD as Sterling trades 0.33% higher on the day to AUD $1.7272.
US Dollar news:
The U.S dollar starts this morning ahead against both Sterling and the euro but simply as a result of market fears. A general sell-off of riskier assets in Asian trading saw traders favour the safe haven of the dollar and as such Sterling and the euro came under fire. Sterling is now trading -0.45% lower at $1.5513 on the day and edging closer to $1.54. The euro is also lower by some margin, a -0.41% move takes it to $1.2830 having been at $1.2889 yesterday.
Poor data yesterday came in the form of weak building permits, a leading indicator of housing construction showed a 3.1% fall which is the lowest fall since May 2009. Ordinarily this would have lead to a decline in the dollar, however, such are the fears that the rest of the world may experience a slowdown that traders opted out of selling the dollar as everything else looked a riskier proposition. As to be expected on market jitters the commodity currencies are lower, CAD trading pretty flat against USD but AUD and NZD are both feeling the effects of a potential downturn by losing ground to the Greenback. Today is a very quiet day for macroeconomic news so traders will be watching the equity markets for a clue on USD direction, USD has been trading in an inverse relationship to the equities as market sentiment shifts from risk on to risk off.
Quote of the Day
‘Action is eloquence.’ – William Shakespeare
