Pound news:
Looking at the markets this morning it would seem that Sterling has run out of steam in its battle to climb versus the Euro and the dollar. Against the US dollar we have slipped to below $1.50 levels, but more worryingly UBS have issued a recommendation to sell Sterling against the dollar as they forecast a fall to at least $1.40. “There are seven reasons to sell sterling,” Gareth Berry, a strategist in Singapore, wrote in an e-mailed report received today. Among the reasons, “the rest of the Bank of England Monetary Policy Committee is unlikely to join Andrew Sentance in voting for rate hikes,” he said. “The beneficial impact of last month’s budget has now been priced into sterling. Third, the scale of the budget cuts forecast for the next four years will undermine growth.”
The euro has also got the better of the Pound as we keep our heads just above €1.19 at €1.1911. The change on the day is 0.00% but over the last week Sterling has continued to inch lower from €1.2100. GBP/AUD is showing Sterling up 0.16% for the day but $1.7183 is some way from Australian Dollar $1.82 that we saw towards the beginning of the month.
Final GDP q/q is out at 09:30 today so be aware, economists forecast no change on the 0.3% gain but there is the potential for upset as Office for National Statistics had postponed the release citing “potential errors”.
US Dollar news:
The dollar is looking stronger as we head into the week as the markets maintain their cautious outlook on the global recovery. The Pound is the first to suffer with notable effect as it dips back below $1.50. At -0.60% down for the day so far the current price of $1.4968 is rather disappointing. The euro is also starting to slip, it is down over half a percent for the day and now trading in the $1.2560 region.
In another warning shot, the Australian dollar is down from its highs after the pace of its recovery seemed a bit hasty considering the rest of the world is struggling. This will start to reaffirm the dollar as a safe place for those moving in and out of assets. Consequently the commodity lead currencies are suffering against the dollar, although the Canadian Dollar has held $0.9670 thus far in thin trading.
The euro is holding firm against the dollar as traders await news on the stress test ahead of those results, the euro should hold onto most of its recent gains, trading this week between $1.2480 and $1.2725, said Jan Lambregts, global head of financial markets research at Rabobank International in London.
There are no figures to be released for the U.S but at 15:00 London time Ben Bernanke speaks and investors will be looking for any sort of clues as to the outlook for the U.S economy from Mr. Bernanke & Co.
Euro news:
The euro will be finding support as the majority of those who had placed bets shorting the euro have revised their positions ahead of the bank stress test. Net speculative bets against the euro were at 38,900 with a value of $6 billion in the week ended Tuesday, compared with the previous week’s 73,700 contracts with a value of $11.2 billion, according to a Scotia Capital. The forecast for the euro is to hold a level of $1.2450 before the stress test reveals the EU banking health. A current price of $1.2575 would suggest the markets have confidence in the single currency. Brian Kim, currency strategist at UBS in Stamford, Conn., noted that even with the euro’s “nice run the fundamental backdrop has not changed.”
Debt-laden, slow-growth economies still pose a threat to the region’s financial system, and investors await the July 23 European bank stress tests to gauge the threat. For the time being we will have to make do with no clear euro direction prior to stress test results.
Quote of the Day
“I believe in the imagination. What I cannot see is infinitely more important than what I can see”. – Duane Michals