US Dollar news:
The dollar is pushing slightly higher this morning but this move is simply range trading and has little relation to market sentiment thus far. Against Sterling the dollar is up by half a percent but when compared to the strong display from GBP/USD yesterday the overall price move is small. 16:30 yesterday saw the dollar sink to $1.5509 but this morning it has pushed back to reclaim $1.5405.
The euro continues to slip against the US Dollar, $1.2732 in the afternoon session has now translated to $1.2674 on the market this morning. Yesterday saw the bias on dollar sell trades as the beige book cited a slowing economy and limited inflation pressure. However, today gives little reason to actively buy other currencies over the dollar and as such traders are starting to move back to the Greenback. In what has been a relatively quiet week for economic data today sees the Trade Balance and Unemployment claims at 13:30 London time. Both these figures have the potential to move the markets and traders will be paying very close attention to them given the spotlight that has been on the U.S economy recently.
Much headline space has been given to the strengthening Yen vs the dollar and as such a contracted trade deficit could be the result of Japanese imports rising in price due to Yen appreciation. However, there are many other factors and countries that contribute to the trade balance so a careful dissection of the figure will be required.
Pound news:
Sterling had a very strong showing in the markets yesterday and tested some significant resistance levels against both the euro and dollar. Having been down around €1.1950 at the beginning of the week yesterday saw GBP/EUR go through €1.21, then €1.2150. With €1.2180 approaching some thought €1.22 was on the cards. This was not the case as Sterling settled at €1.2177 as the equity markets shut yesterday.
This morning sees Sterling slip back slightly but still maintaining €1.2160 on the market. Trading for the pair seems slightly calmer this today as the percentage change is registering at 0.00% so far. Looking at how Sterling is trading across the board the reading is not so positive, all other prices are in red indicating that Sterling is trading lower.
Against the Australian dollar Sterling has now fallen to $1.6716 and appears to be edging ever closer to $1.6690. Likewise, the $1.54 handle against USD looks to be under threat and we may see $1.53 in afternoon trading. The direction for Sterling depends very much on the MPC rate decision later this afternoon. The interest rate is pretty much guaranteed to hold at 0.50% but traders will be looking for clues in the statement given by MPC members. Sterling may climb higher if someone else joins Andrew Sentance in voting for a rate hike or if hawkish tone emanate from the MPC. This all kicks off at midday so expect some volatility leading up to the release.
Euro news:
The euro appears to be continuing to slip against the Pound and U.S dollar this morning despite the well received bond auction issued by Portugal. For the time being the sale of Portuguese paper will be a welcome relief for the euro zone but the concerns over the stress tests and the health of the euro zone as a whole will keep the single currency under pressure. “The successful Portuguese bond auction shows that while European markets have tightened, they do remain open,” said Lena Komileva, head of G7 market economics at Tullett Prebon in London. “They are not frozen.” A look at the trading patterns for the euro shows that the single currency is trading in ranges and has not yet been subject to a sharp fall but the overall trend sees the euro weaken against Sterling and the dollar. Currency traders will now be looking for the euro to slip to €1.22 against the Pound and $1.25 on the dollar.
A brief look at the headlines suggests that further euro falls are projected as the papers all document slowing EU growth, low German inflation and hints of sovereign debt contagion. Any hopes of euro strength in yesterday’s session would have been scrapped after German industrial production came in weaker than expected, the market looking for 1.1% growth but only 0.1% was managed.
Quote of the Day
‘The first step to getting the things you want out of life is this: Decide what you want.’ – Ben Stein
