Euro Pounds Brief Wednesday 6/12/2006

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Wednesday 6/12/2006


• Dollar pullback on strong service sector data
• Euro-dollar still weak on yield
• Hawkish Japan sparks Yen strength
• Gordon Brown releases Pre-Budget Report
• UK Nationwide consumer confidence drops
• Oil in choppy session ahead of US stockpile data

US Dollar:


The US surprised markets yesterday with an unexpectedly strong figure from the service sector. The
figure managed to put the brakes on a sharp two-week-long sell-off in the dollar. Despite trading over
1.9800 against the pound the session low following after the figure was a cent lower at 1.9678.
However with expectations of a narrowing yield advantage over the Euro, the Euro-dollar cross is still
lingering near the 20-month lows struggling to break below 1.3300.
No data of note from the US today; traders await Friday’s employment data.

Pound:


More bearish news from the UK as the Nationwide’s Consumer Confidence Index dropped from an expected
95 to 89 as the Bank of England’s two rate hikes this year boosted mortgage payments and
reeled in enthusiasm on spending. Consumers appear to be concerned about the future economic situation
and employment outlook.
Today the Chancellor publishes the Pre-Budget Report with the focus likely to be on schooling and
green policies. Also today we have Industrial Production and Manufacturing data at 0930.

Euro:


German data dominates the market today as the Euro remains on the front foot in anticipation of an
ECB rate hike tomorrow and a hawkish press conference. With yield advantage narrowing against many
major currencies, the Euro remains strong and will do until the ECB signal a pause in the rate hike cycle.

General News:


• As expected the Bank of Canada kept interest rates on hold at 4.25%.
• A leading Japanese think-tank suggested that Japanese interest rates may rise as soon as this
month. Support was added as a Bank of Japan official struck a hawkish tone in an interview.
• Equity markets closed higher again yesterday on the back of the growing US service sector with
the Dow Jones closing up 47.75 points at 12,331.60 and the FTSE closing up 36 at 6,086.4.
• A choppy session for oil with current trade at $62.58 with US stockpiles due this afternoon.
Heating oil stocks are expected to be down after a cold snap in the States

Inter-bank
Updated 06/12/2006
 
GB POUNDS / US DOLLAR 1.9703
GB POUND / EURO 1.4823
EUR/USD 1.3290
GBP/JPY 226.31
GBP/AUD 2.5073
GBP/NZD 2.8795
GBP/ZAR 14.0089
GBP/CHF 2.3544
GBP/CAD 2.2493
GBP/SGD 3.0306
GBP/THB 70.172
GBP/HKD 15.3009

 

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