Pound news:
The march ahead against the dollar has seen Sterling hit a multi month high, we have not seen GBP/USD trade at this level since Feb 03. An initial break above $1.5950 was a promising move higher but subsequently the Pound has moved back to $1.5941 but this move higher is still a 0.37% gain for the day so far. These are very promising levels for Sterling however, as previously stated, this is driven by dollar events so some reassuring U.K data is needed to maintain these levels if the dollar starts to firm up.
The Pound has also started to gain the advantage on the euro as we creep higher from yesterday, the move is not particularly big but overnight trading has seen Sterling push above €1.2050 to €1.2058. We may hover around this level for some time as trading appears to be thin for GBP/EUR. So far this week there has been little to give GBP/EUR a clear direction in terms of economic data. Today is another quiet day for the U.K, construction PMI is due at 09:30 but unless the numbers are way off market forecasts it is unlikely to move the markets much. Generally speaking the Pound is trading higher against its major pairs, the weak Australian data has seen Sterling climb back to AUD $1.7503 and up 0.70%. This general
Sterling strength has been attributed to investors unwinding their short positions having bet on GBP declines after the election and budget events previously. Once they have trimmed their positions we are likely to see a drop in GBP Sterling, Brian Kim, currency strategist at UBS, noted the pound would be challenged to rally much further as U.K. growth is likely to begin to slow.
US Dollar news:
The markets have switched from risk off and general negativity to risk on and improved confidence. This complete about turn is a little surprising considering it has happened in a pretty short period of time but nevertheless as we stand the dollar is the loser out of this as confidence sees traders pick up Sterling and the euro in favour of the dollar. At 16:30 yesterday Sterling was trading at exactly $1.5900 and this morning see a push to $1.5950. The euro has also pushed through a major $1.32 level to trade higher this morning. Yesterday saw the single currency edge towards $1.32 and over night the dollar has slipped further to fall to $1.3224. The moves lower against the euro and Sterling are a result of improved economic data for the regions but also the consequence of Asian banks shifting their foreign exchange reserves away from the dollar in a bid to diversify. This move was initially started by China who held huge U.S dollar reserves. Despite the general dollar weakness the Australian Dollar is down -0.40% on the USD after building approvals fell and the Central Bank held rates. What is interesting to note is that America was the first economy to show strength and growth coming out of the recession but recent times have seen a complete reversal as the threat of a double dip hinges on the U.S economy. A recent report highlights that U.S treasuries have risen as a sign of bid to quality investing and spending has waned, all signs that the economy is cooling.
Euro news:
So long as the markets have been appeased the euro will continue to rally, this is not particular accurate for the long term but ‘expert’ analysis has been so varied on where the euro is headed that we will concentrate on the short term. This week sees the euro as the currency of the week as the weekend pushed the single currency to $1.31 and a late afternoon rally then took the euro to $1.32. We closed just below that at $1.3191 but the momentum continues as the euro trades at $1.3235 on the market.
Spanish unemployment has come in lower as tourist season kicks in, interestingly this supports the idea of a break-up in the euro as the countries with large tourism industries would benefit hugely from a cheap currency. As it stands this euro rally may signal confidence in the region but in actual fact it might not be of great benefit in boosting exports or increasing tourism.
Quote of the Day
“The brighter you are, the more you have to learn.” – Don Herold
