POUND
The Pound was trading near flat against the Euro and lost a little ground on the U.S Dollar after U.K Industrial Orders were far less than forecast. The news wasn’t enough for the Pound to sustain losses against the Euro but the U.S Dollar was afforded a correction after yesterday’s losses even though issues concerning the U.S debt ceiling are still ongoing. “It`s definitely a weak dollar story that`s been pushing cable higher,” said Raghav Subbarao, currency strategist at Barclays Capital. “But I expect next week`s UK PMI data to be weak which will remind people of the problems the UK economy is facing. Risks are skewed to the downside for cable but it should gain some support from U.S. debt issues and the possibility of downgrade.” Sterling losses seem only to be held back from negative stories in the Euro zone and U.S regarding debt, but if they look likely to be resolved, weak U.K data and an interest rate differential that could be set for some time is likely to put further pressure on the U.K currency. “Clearly at the moment the Monetary Policy Committee is moving toward a more dovish stance,” said Lee Hardman, a currency strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. in London. “I can’t see a rate hike in the next year. I think they will remain on hold until at least the second half of next year, and that will undermine the pound further.”
EURO
The Euro held its own against the Pound this morning after poor U.K Industrial data was released yesterday, but slipped against the U.S Dollar after Standard & Poor rating agency said Greece is likely to partially default following the new bailout plans. Traders are acutely aware of strains in the European banking system and reluctant to back the single currency at present, even in the face of ongoing concerns over the U.S debt ceiling and fast approaching debt repayment deadline that Washington seem no closer to resolving satisfactorily. There are some market jitters at present over the Euro as some analysts are concerned as to whether the bailout for Greece and template for resolving the debt crisis in the greater region is enough to be successful. German Finance Minister Wolfgang Schaeuble suggested the Euro zone debt problems are far from over by suggesting “it would be a mistake to think that the crisis of trust in the euro area can be solved by a single summit”. For now the Euro is tentative ahead of U.S home sales and unemployment data and a U.K consumer confidence and House price survey due tomorrow.
US DOLLAR
The Dollar managed to correct itself and push higher against the Euro whilst staying largely flat against the Pound this morning. The losses against the single currency yesterday were quite pronounced, and a correction this morning was not unexpected given the fiscal debt concerns that still very much exist in the Euro zone. The performance of the Dollar is likely to hang in the balance of the result of the U.S debt ceiling talks and whether an agreement can be hammered out before the debt repayment deadline on August 2nd. The U.S Treasury sold off $12 billion of five day cash management bills at a rate of 0% in an effort to build up cash positions ahead of the August 2nd deadline in which it could default. It will continue its auctions of three and six month bills, with the announcement possibly providing some clues to its strategy. “From a fundamental perspective, the Treasury probably has enough leeway to sell these bills on a normal schedule. However, the administration and the Congressional leadership both want to hold onto the Aug. 2 deadline as a catalyst for action on the debt limit, which argues against a business-as-usual announcement,” said analysts at Wrightson ICAP. Unemployment claims and home sales are due out today in the U.S, but movement will largely be based around the U.S debt ceiling talks that continue up until the deadline next Tuesday.