Euro news:
The biggest development in the euro has been the positive reception from the sale of €1.625 Billion in Greek bonds. There were some fears that Greece would find it difficult to go to the money markets but the recent bond auction shows that those fears were unfounded. “The sovereign debt crisis in Europe is fading to the background, after some remedial steps,” Carl Forcheski, director of foreign exchange at Societe Generale said. “Now, they are not out of the woods yet, but some of the bad headlines that we saw in May have certainly evaporated for now.” EUR/USD continues to rally as the change on the day now shifts from negative to positive, testing the session highs.
10:00 London time reveals some industrial data for the euro zone. The data is not considered earth shatteringly important to the markets but no doubt good numbers for industrial production and consumer price index will support the euro to move higher on the dollar. Such is the optimism for the euro zone that the double downgrade of Portuguese debt by Moody’s has gone pretty much unnoticed. Had the downgrade come at the height of the contagion fears then the markets would have reacted in a completely different manner.
US Dollar news:
The dollar came under heavy selling pressure as the U.S trade deficit widened to -42.3B when the market was looking for a contraction to -39.3B. This saw the dollar start to lose ground in afternoon trading against both Sterling and the euro. Sterling marched on ahead to finish at $1.5178 whilst the euro climbed to $1.2710, both levels are some way off the highs of the year but nevertheless they are showing healthy gains from the lows in previous months.
Further support was given to riskier assets after the Greek bond auction was well received, the euro climbing higher in this morning’s trading to hit a high of the day at $1.2734. The Canadian dollar has also jumped on the U.S weakness to push into the $0.97 level. The current price of $0.9701 suggests CAD/USD will be jumping either side of $0.97 today.
Further U.S dollar data comes in the form of m/m retail sales out at 13:30 London time. This should give a good indication of the health of the U.S economy at consumer level, however, analysts are not optimistic having forecast a downward revision of -0.2%. Anything above or below that is likely to see the dollar move accordingly in the FX markets today.
Pound news:
The Pound has seized the opportunity to make gains on the dollar, and gain it has. Having ended the day yesterday at $1.5178 it has carried the momentum through to trading this morning to register a 0.43 gain on the US dollar so far. A current price on the market of $1.5242 will look very appealing to those who had to contend with prices around $1.45 or lower not so long ago. It will be interesting to see where the Pound goes from here as UBS has forecast a drop to as low as $1.40, whether or not Sterling can hold this level remains to be seen.
The picture is slightly different against the euro as, for the time being, the currency pair has settled in the mid €1.1950 levels with the highs and the lows of the day conveniently falling either side. The past four trading days show a price change at 16:30 of just 5 pips, today is a little better with the current price at €1.1972 but nevertheless trading remains in tight ranges so far. With confidence beginning to grow in the euro zone and questions still being asked about U.K finances, Sterling may find it hard to gain and hold above €1.2050.
Unemployment data out at 09:30could help the situation, the market looking for a reduction in unemployment claims by -20,100. In positive news for the U.K Pimco, the world biggest bond investor is bullish on U.K gilts, seemingly unfazed by recent downgrade threats. The asset manager’s sheer size – it has $1tn (£659bn) of assets under management – makes its views widely followed in the market.
Quote of the Day
“Anyone who has never made a mistake has never tried anything new.” – Albert Einstein