Euro news:
Once again we find ourselves in a position whereby the current EUR/USD price does not reflect the underlying sentiment of euro zone conditions. As has been stated many times before, the outlook on the euro remains bearish yet recent trading prices are no doubt stretching those who have shorted the single currency. This morning already shows the euro moving 0.40% higher on the Greenback and maintaining high $1.2580 levels. “The euro’s retreat from its high on Friday after the soft U.S. jobs data reflects investors’ lack of comfort with the euro in that area”, said Matthew Strauss, senior currency strategist at RBC Capital Markets in Toronto. “Even in the absence of any further data or events it drifted down to below the $1.2550 level,” Strauss said. “The market is concerned that $1.2600 is not reflective of the ongoing concerns in Europe,” he said. Having said that, a move lower may take some time to materialise as the market is unlikely to sell the euro in a panic having heard pretty much all the bad news that could come from the euro zone. For a sharp fall to occur it is likely to require a worst case scenario i.e. default. Speaking of which, Bank of Korea researchers said it is “inevitable” Greece will default because a shrinking economy will push its debt to an unsustainable level. They also commented that “a default is not imminent, but may trigger major chaos in global financial markets when it occurs”.
US Dollar news:
With the U.S equity markets shut there was little market action to move the dollar yesterday, things are back to normal and the dollar starts the day down as investor confidence picks up globally. Against the Pound the dollar has moved down from a close of $1.5114 16:30 yesterday evening, Sterling now jumping either side of $1.52. The euro has also benefited from dollar weakness as it moves up 0.36% on the day and shows a continuing climb from last week, heading into the weekend EUR/ USD was trading in the mid $1.22 level whereas this morning sees $1.2582 on the market with $1.26 being tested.
The commodity lead currencies are all showing gains on the dollar, both Australian Dollar and New Zealand Dollar rallying over one percent for the day. Unfortunately the Canadian dollar, whilst up on the day, is struggling to post meaningful gains; 0.36% the climb so far but still trading in the $0.9440 area. Whether or not U.S traders make up for lost time remains to be seen but nothing is scheduled for release today that is of market moving importance.
Looking at the bigger picture, U.S treasuries yields dropped signalling a move to safer assets as the global economy appears to be heading for a slowdown.
Pound news:
Yesterday was a poor day for the Pound as the markets favoured other currencies leaving Sterling in the red. At one point $1.49 was the target for the downside against the dollar with €1.1990 against the euro also threatening. This move lower has been corrected to some extent as Sterling rallies to a high of $1.5205. It has subsequently dropped lower but we may see the Pound move either side of $1.52 throughout the day, for the time being a gain of 0.42% on US Dollar is good form for Sterling.
Unfortunately the same cannot be said for GBP/EUR as last week’s high of €1.2385 appears to be a flash in the pan. Current trading is showing a 0.00% change for the day and right now the price to buy, €1.2065, is a move higher of just 6pips from 16:30 London time yesterday. One would hope to see a level above €1.2050 maintained but thin trading thus far is giving little indication of GBP/EUR direction.
Yesterday’s data, Services PMI, was a little weaker than expected giving rise to a poor showing, however, the markets seem to have recovered from this, ready for the next challenge. Traders will have to wait though as today is quiet for macroeconomic news, the next market moving data comes out on Wednesday.