Pound news:
Afternoon trading saw Sterling catch a second wind to push on handsomely against the euro. At one point €1.24 was a possibility when €1.2385 was reached. Unfortunately €1.2385 was the high of the day and as we drew towards 16:30 Sterling edged back slightly to close at €1.2372. Overnight trading has seen those gains erode further as this morning shows Sterling just holding on to the €1.2300 levels. A low so far of €1.2298 would suggest that Sterling has the potential to hold above €1.23, however Q1 GDP figures have been pushed back to July 12th so if we are to benefit from that it won’t be today.
The Pound got off to a difficult start as the Nationwide House Price Index came in at 0.1% when the market was looking for 0.3%. In fragile economic times smaller moves lower can have disproportionately larger effects on market perceptions. GBP/USD is relatively unchanged on the day with trading in thin volumes thus far. We are slightly lower in comparison to last night, current market price of $1.5050 shows we have dropped 35pips over night and in morning trading.
Against the Australian dollar trading has been very choppy, a look at the market today already shows a two cent move between the high and low of the day. The current market price shows AUD$ 1.7608 but this is highly likely to change over the course of the day by some margin.
US Dollar news:
The dollar is broadly weaker this morning as the Greenback comes under pressure from growing concern that the U.S economy is beginning to falter, heading for a double dip recession. This paints a mixed picture as the dollar becomes out of favour for investors, but at the same time its safe haven status is still valued by others. The U.S dollar was always going to have a tough time today as the previous nights Asian trading saw the Shanghai Composite fall to a 14-month low sending confidence plummeting.
The dollar finds itself marginally up on the Pound by 0.14% at $1.5044 but down on the euro by 0.23%. Close of play yesterday saw the euro drop to $1.2189 after heavy losses but this morning’s trading session shows those dollar gains paired. The commodity lead currencies took heavy losses yesterday as rumours of a global slowdown threatened the price of major commodities such as oil and steel. The U.S dollar came under pressure in late trading yesterday as CB consumer confidence was much lower than expected. 13:30 London time sees the release of preliminary non-farm employment change. Whilst this is an estimated figure that precedes the actual figure, it has been noted for its predictive qualities.
Euro news:
In late trading the euro was given slight support as a leak from a German law maker hinted that unemployment was down 60,000. It turns out that this was highly inaccurate and the figure came at down 21,000, still good news but the market was looking for down 23,000 so this figure is unlikely to move the euro.
What is going to move the euro is the impending deadline for banks to repay €442billion to the ECB. This will cause banks to re-finance their loans on the short term, the cost of which is likely to add further stress to the system. The outcome of the repayment operation is likely to shape today’s trading; if most of the banks require the new 3 month liquidity programme to service their debt then further EUR/USD falls can be expected.
For the time being however the euro is actually trading up against the dollar, this is down to “no fresh euro-negative news since last week despite the euro’s slide (Tuesday), encouraging participants to cover their short euro positions,” according to Mizuho Corporate Bank senior trader Yuichiro Harada.
Quote of the Day
“Just living is not enough. One must have sunshine, freedom, and a little flower.” – Hans Christian Anderson