Euro news:
The Euro remains weaker against the pound amongst ongoing concerns with economies in the Euro zone, even though German GDP data was much stronger than expected on Friday. This is a bad sign for the Euro which is still viewed upon as a risky bet for investors.
The Euro looks particularly vulnerable against the US Dollar as a run for cover in safe haven currencies continues. The many debt problems that face a raft of countries within the member state continue to undermine strong performers like Germany putting off any stronger demand for the single currency. CPI (inflation) came out this morning as expected at 1.7%, the market will now focus on German ZEW economic sentiment out tomorrow at 10am, a number likely to be stronger than the 20.9 forecast.
US Dollar news:
The USD is trading slightly stronger against the pound this morning but has seen similar losses against the Euro. Last week, however the USD rallied by nearly five cents against the Euro reaching $1.2731 as many market participants avoided the risky Euro in favour of a safer looking USD. The same risk aversion approach was also seen with the USD trading against the pound, gaining over 3 cents and moving away from a recent high of 1.5996.
Macroeconomic data out on Friday provided a mixed picture over the state of the US economy with retail sale rising 0.2% while the University of Michigan’s sentiment index improved to 69.6 from 67.8 in July. Inflation in the US remains high with CPI data rising more than expected in July but the data is unlikely to affect interest rate expectations. Key economic data releases this week include housing starts, building permits and the producer price index.
Pound news:
Sterling has maintained some strength against the Euro going into a new week but has fallen back into 1.2172 after reaching a high of 1.2236 continuing to take advantage of euro weakness. The pound has lost some of the gains it made in early morning trading on the back of poorer housing data, with the rightmove number coming in at –1.7% against –0.6% expected. This is the biggest monthly decline in house price data since December 2009 fuelling concerns over the impact government spending cuts will have on the economy. It is clear in the market however, that investors see this latest news as less of a problem than the debt in various parts of the Euro zone.
The pound against the USD is expected to trade lower this week as investors continue to avoid risk and favour the safe haven USD. Tomorrow sees the release of key UK inflation numbers with CPI due for release at 9.30am followed by the MPC minutes and retail sales out on Wednesday and Thursday this week. If economic data continues to look on the downside for the Euro zone, the pound could trade back into 1.22 against the Euro especially if UK economic data improves.
Quote of the Day
From our birthday, until we die, is but the winking of an eye. – William Butler Yeats
