The euro is pushing ahead, $1.3028 is now the price on the market which would suggest that momentum has seen the single currency hold above $1.30 as 16:30 London time yesterday saw the euro trade at $1.3004. Sterling is also gaining on the back of dollar weakness as the Pound cements itself in the $1.56 level at $1.5628 and up 0.21% so far.

The commodity lead currencies are mixed this morning as Australian Dollar recovers some lost ground to trade up 0.79% but New Zealand Dollar has edged lower by -0.18%. The Canadian dollar is the stronger of the two dollar currencies as it moves 0.32% up today but remains trading at $0.9661. Yesterday was not so promising on the macroeconomic front as core durable goods orders came in down -0.6% when the market was looking for the same figure but to the positive. Unemployment claims are due 13:30 London time, this figure is a w/w number but still has the potential to move the market.

Pound news:
I shall start with news on GBP/USD as it is proving to be a more favourable trading partner for the Pound. Yesterday Sterling was trading just inside the $1.56 level and this morning reveals that the markets still prefer the Pound as we trade up 0.14% on the day and at $1.5617 on the market. This $1.56 level is by no means guaranteed so we may see Sterling trade either side of $1.56 before the markets decide on an appropriate price.

GBP/EUR on the other hand is doing very little, Sterling finds itself down -0.21% on the day but in a very familiar price level; €1.1973 is the bid on the market. Yesterday did look promising as the Pound hit €1.20 on a couple of occasions but having done so it retreated almost immediately. As the equity markets shut Sterling was trading at €1.2008 but the momentum that got Sterling there has all but dissipated this morning.

Comments from BoE’s Mervyn King did little to help the Pound, the theme of yesterday’s speech centred on doing everything to stimulate the economy which means low rates and possible further quantitative easing measures. The Pound is up on the US dollar due to broad U.S weakness as there is little reason for Sterling to rally, the Nationwide House Price Index proved to be of little help as the number came in at -0.5% with expectations at -0.2%.

Social Housing Squeeze will cost UK economy £2.5 billion over 5 years

Euro news:
Just as the markets adjust to a more stable euro zone the single currency finds itself climbing ever higher on the dollar as economic weakness in the U.S gives traders no reason to buy the dollar in favour of the euro. The euro has now moved ahead by over 0.60% on the day and is set to test $1.3080 if upside momentum continues. The rally against the dollar is also helping the single currency move higher against other major trading partners, namely the Pound. So long as markets look favourably on the euro the Pound will have trouble taking the upper hand in trading. The current price is now starting to edge lower towards the €1.1950 area, unfortunately this level has been par for the course for July.

Just to rain on the euro’s parade, an interesting article in The Telegraph highlights that despite their perceived health the European banks have amassed €30 trillion in liabilities with a serious funding threat looming. The single currency is by no means out of the woods just yet.

Quote of the Day
“Learn as if you were going to live forever. Live as if you were going to die tomorrow.” – Anon.

The percentage changes for Sterling are also negligible for the day, -0.03% down shows thin trading volumes for today against the dollar. Yesterday did see GBP/USD hit $1.55 briefly but we closed at 16:30 London time at $1.5492; opening this morning slightly lower at $1.5476.

The Canadian dollar has now edged into $0.97 with a 0.15% move higher for the day but again the relatively small movements show the currency pair has little direction. AUD and NZD are benefiting from a pickup in improved market sentiment and are edging out small gains on the USD. The major macroeconomic events now appear to be behind us and so attention turns to domestic fundamentals for the currencies.

The U.S dollar started the week on the front foot as new home sales came in at 330,000, up 13,000 on market expectations. 15:00 London time today sees Consumer Confidence figures released with the markets looking for a slight revision lower, naturally anything which betters that will give the dollar a boost.

Pound news:
Sterling appears to have found its levels at the moment as trading against both the euro and the dollar continues to occur within tight ranges. The major support from the improved GDP figures appears to be subsiding as Sterling is edging slightly lower against the euro. Last Friday saw Sterling push to €1.20 but since then we have gradually moved lower, ending yesterday at €1.1921. This morning shows a very marginal price change but unfortunately it reveals Sterling weakness as the Pound now trades at €1.1910 with €1.18 looming. It is worth looking back, albeit a couple of months, when Sterling fell fairly heavily in afternoon trading when a significant support level was breached. Traders gave no real reason for the fall except that market psychology resulted in a mild panic sell-off. A fall through to €1.18 may trigger a number of sell orders in the market, be aware.

Sterling is also moving lower against the dollar having hit $1.55 in yesterday’s trading. Maintaining $1.55 was asking too much from Sterling and as the equity markets shut Sterling was back at $1.5492. Whilst the Pound has held the $1.5450 level the price has moved lower from yesterday and a look at the markets would suggest Sterling is under a little bit of pressure today. On the macroeconomic front there is nothing of great significance today so the markets will be waiting for BoE Governor Mervyn King’s speech at 11:45 tomorrow morning.

Euro news:
Despite all the questions regarding the nature of the stress test the euro continues to outperform as the markets put their doubts to one side for the time being. No doubt the EU finance ministers will be looking to put this test behind them in order to hush those who still feel the euro zone is doomed. There are still those who are sticking by their original predictions but with the euro steadily moving higher on the U.S dollar the herd must the thinning. As luck would have it a snap shot of the market shows EUR/USD has just hit $1.3003 at interbank level. With the rest of the day’s trading to go it will be interesting to see where the euro goes from here and whether it has the momentum to hold above $1.30. The single currency has already received support this morning as German data has come in on the positive side. The data is not of huge importance but in reference to the euro zone, every little helps.

Quote of the Day
“To measure the man, measure his heart.” – Malcolm Stevenson Forbes

The euro is also holding firm against the dollar, trading is in thin volumes so far but the single currency is edging ahead with a 0.10% gain and is at $1.2918 on the market. With risk back on the commodity lead currencies are receiving a slight boost, Australian Dollar and New Zealand Dollar both up on the US dollar and Canadian Dollar showing just 0.01% change for day and trading in the mid $0.9650 levels. The focus now for the dollar is which way EUR/USD trades “It will be back to fundamentals for the currency market on Monday-we are walking into a week with a large number of potentially dollar-negative event risks, and because of that, the EUR/USD could extend its gains,” said Kathy Lien, director of currency research at Global Forex Trading in New York.

Looking at the week ahead the first numbers for USD is new homes sales at 15:00 London time. This is a pretty significant piece of market data as the ripple effect from a new home sale is wide reaching within the U.S economy.

Pound news:
The EU bank stress test was supposed to be the make or break factor for GBP/EUR but the test results were pretty tame and as such Sterling has moved higher from last week but has still failed to get through €1.20. Last week Sterling remained well and truly in the mid €1.18 levels however huge GDP growth (1.1% versus 0.6% expected) saw Sterling mover higher, at one point touching €1.20 as the stress test results were trickling through. Unfortunately €1.20 was a brief encounter and this morning the price on the market is €1.1957 with a 0.10% change in Sterling’s favour. One would have hoped the very positive GDP news would have pushed Sterling higher but the relatively good news from the euro zone quickly capped any gains for GBP/ EUR.

The Pound also shot higher against the Greenback after the better than expected news. For much of the week Sterling was trading in the $1.52 levels and showing no clear direction however we start this week with a markedly higher price. $1.5464 is now the current level for Sterling on the market, levels not seen since pre-election.

Looking at the FX markets in general Sterling is benefiting from improved market sentiment; the Pound trading higher against the majority of its commonly traded pairs. With the high of the day so close to $1.55 we may see this resistance level breached during the week if things continue to stay ‘risk on’. With the U.K finances still in a very precarious state negative market sentiment tends to drag Sterling lower.

Euro news:
The Stress Test. Much was made about this test and the implications the results would have on the euro and of course euro zone market sentiment. The results were announced at 17:00 on Friday afternoon which was after the equity markets were closed but nevertheless no one in the city would have gone home early. As the results came through it soon became apparent that the test was a little too lenient to be taken seriously. Out of a possible 91 banks only 7 failed which was seen as a slightly low figure considering the amount of sovereign debt held by these banks. In the end “The handful of banks that failed were smaller banks of low consequence”, said Ron Leven, currency strategist at Morgan Stanley in New York. It would appear that despite the general feeling that the test was far from rigorous the results have done just enough to calm the markets. From here on in we are back to fundamentals for euro trading direction. EUR/USD may trade higher given the euro has held $1.2920, $1.30 is now the next major target for the currency pair given that we have visited this price within the last two weeks previously.

Quote of the Day
“Leap and the net will appear.” – Julie Cameron

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

The opinions that the euro has been overdone sees the single currency slip to $1.2794, this is actually a move higher for the day so far but a dip from $1.2817 yesterday. Sterling is very much in the same boat, the day’s change shows a 0.18% gain on the Greenback but the price on the market shows a slip from yesterdays $1.520, $1.5188 your price to buy now. The Yen has gained half a percent on the US Dollar, the Yen being viewed as the last resort safe haven despite their huge deficit and lagging economy.

Against the commodity lead currencies the dollar finds itself losing ground to Australian Dollar, New Zealand Dollar and Canadian Dollar however the moves lower have been contained to less than -0.35% thus far. Yesterday was a quiet day on the macroeconomic front but today sees a wealth of data including existing home sale and unemployment claims as well as Federal Reserve Chairman Ben Bernanke testifying before the House Financial Services Committee, in Washington DC.

Pound news:
The spotlight has now moved on from being on the U.K. We have had our election and the emergency budget has been and gone. In terms of Forex this now means that Sterling has been rising and falling in line with market sentiment surrounding the euro and dollar. As sentiment improved for the euro Sterling initially rallied off the back of this new found confidence. How ever, as the outlook improved for the euro yet further still we saw Sterling slump as investors favoured the single currency. Now, Sterling finds itself edging lower after Bernanke’s comments dampened risk appetite.

Unfortunately, the minutes from the MPC meeting saw rates unchanged, as was to be expected, but also no one new joined Andrew Sentance in voting for a rate hike. Sterling now finds itself back in the €1.18 level having briefly crept into €1.1905, €1.1868 is the current price to buy on the market.

U.K retail sales out at 09:30 could move Sterling but a break and hold of €1.19 looks optimistic for the time being. The U.S dollar is starting to slip and a look at the markets shows Sterling has moved back to a $1.5210 price. This is a move for the good for GBP/USD but $1.52 is not a level to get too excited about, a look back at the last two weeks shows Sterling has hovered at this price for some time.

Euro news:
The euro has started the day relatively unchanged against Sterling and the dollar. Against Sterling a price of 1.1866 is pretty much flat versus the price last night whilst early trading saw the euro slump below $1.28 but has since recovered. A snap shot of the market shows that the euro is currently undergoing a slight rally back to $1.2816 which is exactly where we left it at 16:30 yesterday.

The main driving force for the euro, and in fact a key turning point for the euro, will be the results of the stress test. EU Commissioner Oliver Rehn has announced that the tests will be an accurate portrayal of EU bank health; the markets remain sceptical. So far this morning the euro has received support as manufacturing data for Germany and the euro zone as a whole comes out better than expected. It will be interesting to watch the markets today and tomorrow as the actual results for the EU bank stress tests are due to be released at 17:00 London time on Friday, after markets are shut.

Quote of the Day
“Self-reliance is the only road to true freedom, and being one’s own person is its ultimate reward.” – Patricia Sampson

Not one to go without a fight the Pound is inching higher against the euro but we still find ourselves trading in the €1.18 level at €1.1875 on the market. The high of the day, 8pips short of €1.19 would suggest that Sterling may retest that area if the upward trend continues.

Sterling has also moved higher against the dollar, after a pretty flat opening Sterling has tested the $1.53 level on several occasions today. Rather interestingly, reports suggest that this move higher is simply a recovery after an erroneous trade sent Sterling lower, known as a fat finger trade in the city. A clear direction for Sterling may arrive after the MPC meeting minutes. Should another member join Andrew Sentance in voting for a rate hike then we are likely to see Sterling rally on the hope of monetary policy tightening in the not too distant future. “MPC member Sentance is expected to have voted for a rate hike at the meeting, but any sign that other members joined him will give sterling a lift,” analysts at Credit Agricole CIB said in a note to clients.

US Dollar news:
The dollar starts this morning broadly down against it major pairs as the market still favours risk as opposed to flight to quality. Much of this renewed confidence comes from improvements in the euro zone so we may start to see some dollar strength once the furore over the bank stress test subsides.

The euro has started to slip from its highs, last night we ended at $1.2908 and this morning sees a dip to $1.2895. Not a huge move lower but many are speculating that the euro rally is coming to an end. The common currency’s recent rally may have outpaced the support the euro is likely to glean from the bank stress tests. The euro has advanced all the way to $1.30 from the four-year low just under $1.19 hit in early June and those gains may have been overdone, analysts said. After a slight slip lower Sterling has also started this morning in the positive by moving ahead 0.35% to trade at $1.5312. This is very close to the highs of the day so we may see Sterling bounce between $1.53 and $1.52 without any news to push it in either direction.

The Bank of Canada raised rates by 25 basis points, consequently CAD has moved higher on the U.S dollar to trade at $0.9650, up 0.71%. Generally speaking the commodity lead currencies are all faring better today but the move lower from the U.S dollar is by no means substantial. Ahead of the stress tests, investors Wednesday and Thursday will zero in on Federal Reserve Chairman Ben Bernanke’s testimony to Congress, dissecting his statement for clues on the Fed’s outlook for U.S. growth, which could offer guidance on the eventual tightening of monetary policy.

Euro news:
As the euro starts to dip ever so slightly lower against its major traded pairs it is likely that the market has viewed the euro rally as overdone. The climb to highs of $1.30 earlier in the week against the dollar was driven purely by rumours that EU banks are capitalised better than expected. However, in an about turn, the markets are now taking the view that if the vast majority of banks pass with flying colours then the significance or importance of the test will come into question. “People are going to take the tests with a grain of salt if they show incredibly strong results for European banks,” said Greg Salvaggio, vice president of capital markets at Tempus Consulting in Washington. “I don’t think the market is going to believe it.” Either way, the bank stress test will be a key event for the direction of the euro and the EU finance ministers must get it right by instilling a sense of calm in the markets whilst maintaining the credibility of the test itself. A snap shot of the market now shows Sterling approaching €1.19, 7 pips shy at 1.1893 so far and at the high of the day, a break through €1.19 will be the key resistance level to look out for.

Quote of the Day
“It does not matter how slowly you go so long as you do not stop.” – Confucius

Sterling U.S dollar was also much the same, Sterling moving away from the high of $1.5309 from the previous week. This move lower was also as a result of the euro being the currency of choice. Unfortunately prices fall much faster then they rise so Sterling may find it hard to press ahead with no real support behind it today. As it is $1.5290 is viewed as a respectable level for GBP/USD given the economic climate so we may see the price hold at this level throughout the day.

US Dollar news:
The dollar opens down this morning as traders are still unsure whether we are headed for a double dip recession. So far the downturn has been kept at bay resulting in dollar falls as investors still favour the riskier assets.

Yesterday saw Sterling take a slight tumble as it fell to $1.5228 at the close of play, however, this morning sees the Pound rallying back and testing the $1.53 levels; $1.5290 the price on the market.

The euro had a relatively quiet day, trading in the $1.29 levels for much of the day although $1.30 was breached but failed to hold there. This morning again sees a high of the day in $1.30 territory but the current price has slipped away from there as EUR/USD trades at 1.2974. The commodity lead currencies are all up on the U.S dollar, both Australian Dollar and New Zealand Dollar climbing over one percent for the day so far. The Canadian dollar is lagging behind somewhat but trading at $0.9519 and 0.44% up so far.

The Commodity lead currencies are seeing support on speculation that China is easing its tightening, China being one of Australia’s best customers for raw materials. Yesterday there was little news and today is not that much busier, 13:30 London time sees U.S building permits followed 30 minutes later by bank of Canada rate statement.

Euro news:
In afternoon trading yesterday the euro received a second wind and took full advantage to move higher on Sterling and maintain $1.2960 against the dollar. The euro advanced to €1.1743 yesterday having been up at €1.19 for the last two weeks.

Looking at market volumes, trading for GBP/EUR appears to be relatively calm this morning but if we were to pick out a trend it would seem that Sterling is starting to move lower and away from its highs of the day. Considering the MPC minutes are out tomorrow followed on Friday by the EU bank stress test this may be the calm before the storm for GBP/EUR. Any hawkish sentiment will hopefully drive Sterling higher but should the stability of EU banks look strong then the euro will have the upper hand come the end of the week.

The new-found confidence has seen the euro move around the $1.30 mark but has failed to push higher, “Confidence will take a hit if European economic growth begins to fade,” said Greg Gibbs, a currency strategist in Sydney. “It is hard to see confidence in European debt markets improving further from here. Perhaps the stress tests will deliver one more spurt of confidence. But it is close to a peak and so is the euro.”

Quote of the Day
“One should always play fairly when one has the winning cards.” – Oscar Wilde

The dollar is also coming under pressure for the time being, the euro trading higher but gains thus far remain subdued. The next test for the euro comes in the form of the stress test results for euro zone banks. Rumours so far have hinted that the banks are not in dire straits but these rumours have come from those who wish to instill a sense of calm; EU finance ministers.

An interesting article in the Guardian suggests that a number of German, Spanish and Greek banks will be forced to raise further capital in order to appease the regulators.

Pound news:
Thursday and Friday saw Sterling slip against the euro as the €1.19 level was breached leading the way for further losses into the €1.18 level. The Pound finally came to a rest at €1.1839 at 16:30 on Friday as €1.20 appeared to be simply too much for Sterling to hold. Trading ranges today have been very tight with Sterling moving within a 40pip range, the high of the day so far just €1.1867. Should the euro zone continue to win the sentiment of investors then €1.17 is the next level to watch out for on the downside.

GBP/USD is doing slightly better, the dollar has given little away over the weekend but Sterling has moved higher to trade at $1.5340 on the market. Momentum to the upside should see $1.5350 as the next short term level. Sterling may find moving to $1.54 difficult as better-than-expected U.S corporate earnings from the U.S have supported the dollar.

Against the Aussie dollar trading is somewhat muted but AUD $1.7592 is still a respectable level for the Pound. In terms of macroeconomic data last week was not too bad for Sterling as unemployment figures beat market expectations and noting came in worse than expected. Monday is a very quiet day generally for any data but Wednesday is the next scheduled release for high impact U.K data.

US Dollar news:
Trading this morning appears to be relatively calm as percentage changes for the day so far are pretty insignificant. Sterling is moving higher against the dollar by 0.15% but the weekend has not moved the currency pair as the current price, $1.5319, is a few pips higher then where we left it on Friday.

The euro is also edging higher having slipped in very early morning trading after Moody’s cut Ireland’s rating from Aa1 to Aa2. The price on the market of $1.2958 is an improvement from $1.2928 by Friday’s close, a day when we also saw $1.30. If upside momentum can continue then the dollar may lose ground as the euro pushes back towards $1.30. Trading for the dollar is mixed this morning with the commodity lead currencies taking no particular direction so far, AUD is showing no change whilst NZD is down -0.12%. The Canadian dollar is pushing higher but $0.9491 may seem a bit disappointing for the currency that once hit parity with the Greenback.

A broader outlook for the dollar suggests some downward pressure as the U.S recovery begins to lose momentum whilst issues in the euro zone appear to be stabilising. “Certainly there is an increasing view among investors that evidence (shows) the U.S. economic recovery is losing momentum… (This) should be seen as a U.S. dollar-negative, especially after the stabilization of the euro,” said Mike Jones, currency strategist at the Bank of New Zealand.

The core problems still exist so one particular wobble could see the euro tumble again but for the time being the market is content with the measures put in place to support the single currency. Obviously, all eyes will be on the stress test results but so far so good for banking capital requirements. “People are looking at all the measures the Europeans are putting in place,” said Chris Turner, head of foreign exchange strategy at ING Financial Markets in London. Those measures have calmed investors, he said. For the time being this will support the euro but this may come at a price for those selling Sterling as GBP/EUR price edges ever lower, -0.13% down for the day.

Pound news:
As previously mentioned the divergence on GBP/USD performance and GBP/EUR has been an interesting thing to watch. This performance difference is now even more evident as Sterling fails to hold on to €1.20 but surges to $1.54.

Starting with the euro, Sterling appears to be suffering as concerns with the single currency are subsiding. €1.19 seems to be the level that traders and investors are happy with. Looking back over the past month Sterling has moved into €1.20 but has edged down in overnight trading. So far Sterling has maintained the €1.19 area but the current price and low of the day €1.1925 is moving worryingly close to €1.1890.

Against the dollar on the other hand, Sterling has rallied hard to move back to levels we are more comfortable with; $1.5439 is nothing new but shows a positive move from the lows seen post election. This current price should be maintained by Sterling as we are not testing any yearly highs, however, “There is no real trend to speak of, but
more people were willing to buy up the pound,” one London-based trader said. Rallies with no real reason for support often move back sharply as traders take their profits. One possible suggestion for the GBP/USD rally is that Sterling is finding strength off the back of the new found confidence in the euro, putting global concerns at ease. This would definitely explain the difficulty the Pound has had in making gains on the euro.

US Dollar news:
As we head to the weekend a look back sees that this week has been particularly bad for the dollar against both the euro and Sterling. Having started against the Pound at $1.5014 on Monday the price on the market of $1.5443 shows a tremendous 4 cent move for the Pound.

This morning sees the dollar edging ahead but a gain of 0.17% still sees GBP/USD trading above the $1.5420 level. The euro has also had a stellar week breaking through resistance level after resistance level to reach $1.2948. If this momentum can be maintained then $1.30 may be re-visited but the weekend may see traders take profits thus pushing the euro lower. It has also been a volatile week for the commodity lead currencies, as market sentiment shifts so too does AUD, NZD and CAD, all very sensitive to threats of a global slowdown. AUD came under particular downward pressure when China, the biggest consumer of iron ore, announced they would be cutting back on their output.

CAD has seen $0.97 versus the dollar this week but this morning sees $0.9615 and -0.13% down on USD. Generally speaking the dollar has come under pressure from a string of weak data “Thursday brought a terrible cross-section of data,” said David Semmens, U.S. economist at Standard Chartered Bank in New York. “This clearly points to a slowing in activity and a very weak start” in the U.S. for second half of the year, Semmens said. The U.S may find a saving grace in CPI data or TIC Long Term Purchases but the trend so far would suggest it’s a long shot.

Quote of the Day
“The only real mistake is the one from which we learn nothing.” – John Powell

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