Euro news:
Those following the markets should be aware that 17:00 today sees the release of bank stress test results. European regulators are scrutinizing banks to assess if they have enough funds, defined as a Tier 1 capital ratio of at least 6 percent, to withstand a recession and sovereign debt crisis. For EU stability we are looking for results somewhere in the middle ground; poor results will see panic grip the markets again whereas outstanding results will question the integrity of the test with many claiming it too forgiving.
Looking at the markets there is some movement but nothing that gives away any clues. The euro has just managed to creep back to $1.29 but of course the euro has been higher earlier in the week. Sterling is also up but has just pulled back slightly, maintaining the mid 1.18 region. Daisuke Karakama, a market economist in Tokyo at Mizuho Corporate Bank Ltd., Japan has picked a side, “The stress tests won’t deliver a perfect score, I’m betting the results will revive negative sentiment about the euro.” It is now time to decide if you are with or against Mr Karakama and his predictions.
Pound news:
Trading has been pretty consistent for the Pound, looking back at the week we have remained very much in the €1.18 level, dipping to €1.1743 on Monday but rallying back the following morning. Heading into the weekend it appears it is as you were for Sterling as we sit at €1.1888 on the market. This price reflects a 0.49% move higher for the day but even so €1.19 appears elusive for the time being. This is very much likely to change as we get closer to the banking test results but there are a number of possible outcomes.
Sterling has peaked and troughed as sentiment rises and falls for the euro zone so the immediate outcome for Sterling is not so easy to predict. Improved market sentiment for the euro zone has often lifted Sterling as well but obviously stellar results for EU banks could see traders drop Sterling all together for the euro. At the moment Sterling has the upper hand.
Against the dollar the Pound is making some good progress as we trade into the $1.53 level. The high of the day is just fractionally higher at $1.5318 so it remains to be seen if $1.53 or higher can be held. Sterling would have found support yesterday as retail sales came in to the good, market was looking for 0.5% improvement but the economy delivered 0.7% instead. Another one to watch out for today is Preliminary GDP q/q, whilst this is only preliminary it does have the biggest impact as it is the first indication for GDP followed by the revised then final figure.
US Dollar news:
The markets are very much unchanged this morning as everyone waits for the results of the EU stress test. So far the rumours are suggesting that the health of the banking sector should be ok but as such no one has ventured into placing a large bet. The positive sentiment has seen the dollar suffer slightly in morning trading against the Pound as Sterling creeps up into $1.5301, up 0.27% so far. However, trading against the euro remains pretty flat, the single currency down -0.13% but remaining in the high $1.28 levels at $1.2876.
Against the commodity lead currencies there is little to report as they all trade within tight ranges, Canadian Dollar edging out a gain of 0.06% to trade at $0.9649. Yesterday was a mixed day on the macroeconomic front as unemployment claims disappointed, up 15,000 to 464,000 but existing home sales beat expectations of 5.18M to register 5.37M. The U.S dollar is viewed has a safe haven currency however, the Yen and Swiss Franc are now being favoured in times of uncertainty. As such, disappointing EU stress test results may see the dollar rally but the Yen and Swiss Franc are likely to climb higher should panic grip the market.
Quote of the Day
“Time flies like an arrow. Fruit flies like a banana.” – Groucho Marx