Currency Market Update 17/05/10

[PhilBen]

Just got back from holiday and mist all the changes in the markets, but here is today's report.

The pound is suffering a similar fate as the euro this morning pulling to a 13month low during Asia trade. Prime Minister David Cameron stated over the weekend that the government has discovered “very bad” spending decisions by the previous administration and the release of weaker housing data supported the move lower. Rightmove house price index dropped to 0.7% m/m in May from 2.6% in April.

The euro continues to extend losses as concerns have increased over the impact that EU consolidation measures to reduce fiscal deficits would undermine the region’s recovery. Institutional investors have begun to consider EU peripheral sovereign debt as a ‘too risky’ investment and are scaling back their exposure to this risk, placing selling pressure on the euro.
There is no economic data scheduled for release today.

Live IB rates at 9.57 am UK
GBP – EURO 1.1730
GBP - USD 1.441
GBP- AUD 1.646
EURO - USD 1.228

[PhilBen]

A small recovery in the Euro gave the Pound some support against the favoured US dollar. Debt concerns remain to influence the Euro-Zone markets as Portugal and Spain are the most recent countries to take steps to reduce their spending. Concerns over the UK’s record deficit position have increased as well after UK Chancellor George Osborne commented that the previous Labour government had ”fiddled” forecasts to support their spending cuts proposal and further accused them of pursuing a “scorched earth policy” prior to the election thus leaving behind billions in hidden spending commitments. The heightened risk to government spending and Britain’s debt has weakened sterling against most of the majors.

Major Data out Today
UK CPI
EURO HICP - Core (F)
EURO Trade balance (nsa)
DE ZEW (Current Conditions)
DE ZEW (Economic Sentiment)
EURO ZEW (Economic Sentiment)
US Housing Starts
US PPI
US PPI ex food and energy

Live IB rates at 10.02 am UK
GBP – EURO 1.164
GBP - USD 1.444
GBP- AUD 1.649
EURO - USD 1.24

[PhilBen]

Risk aversion remains the dominant theme for markets and yesterday as the trend once again seems to support the US dollar. However the Pound made good gains against the Euro which also reached a 4 year low on the Dollar. UK inflation data came in higher than expected at 3.7% with the forecast of 3.5%. This could put pressure on the BoE to put up interest rates but for the moment King has stated the rise in inflation is only a temporary thing and the monetary policy and interest rates would remain low for the foreseeable future. US data yesterday boosted the dollar upward trend after an increase in the housing starts numbers for April and lower PPI inflation data. Housing starts jumped to 672K from 635K and PPI inflation dropped to 5.5% from the previous 6% for March.

Major Data out Today
US CPI
US CPI ex food and energy

Live IB rates at 10.50am UK
GBP – EURO 1.1705
GBP - USD 1.426
GBP- AUD 1.689
EURO - USD 1.218

[PhilBen]

Bank of England minutes sent sterling lower as they were mostly seen as being fairly poor. The MPC voted in favour to keep interest rate on hold at 0.5% and to leave the asset purchase scheme the same. The BoE highlighted the lack of confidence in the debt crisis in Europe and with political turmoil as the reason for any increase in market would create even more uncertainty and currency fluctuations. US CPI for April was -0.1%, lower than expected and supports the Fed’s view that interest rate levels are appropriate for the time being. The Euro gained some support as speculation began to climb over market intervention by central banks to support the single currency. There are some rumours that Greece might be leaving the ERU although these rumours were later denied.
UK retail sales figures came out in line with what was expected weakening the pound this morning as economic recovery continues to struggle.

Major Data out Today
DE PPI
US Initial Claims
US Philadelphia Fed Survey

Live IB rates at 10.14am UK
GBP – EURO 1.159
GBP - USD 1.435
GBP- AUD 1.729
EURO - USD 1.238

[PhilBen]

Markets slump as US jobs data and the Euro-Zone starts to concern the global outlook. Germany’s actions to ban of naked short-selling combined with the expectation on the vote over the US financial regulatory bill raised concern that governments were panicking by using regulatory crackdowns’ and with the lack of clarity it shattered market confidence. US jobs data and leading indicator figures both came out disappointing figures and revived fears of an unstable economic recovery in the US. In the UK today we see the release of UK public spending figures and with concerns surrounding debt levels remaining high the numbers will be critical in determining the pounds trend for today.

Major Data out Today
DE GDP (wda) (F)
EURO Current account (nsa)
DE IFO Business Climate
DE IFO Current Conditions
DE IFO Expectations
UK Total Business Investment (P)
UK M4 Money Supply (P)

Live IB rates at 9.27 am UK
GBP – EURO 1.154
GBP - USD 1.438
GBP- AUD 1.742
EURO - USD 1.249

[PhilBen]

The pound holds its levels this morning as traders wait for the first major announcement from the New Chancellor George Osborne. Osborne is expected to outline the government’s £6bln spending cut strategy and markets are looking to be reacting in a positive stance as risk aversion eases with the potential reduction in debt and the improvement this may have on the UK’s economic and debt position. In an economic climate where UK debt is of particular concern to market participants any debt reduction measures are being viewed favourably as it has a positive effect on the country’s stability.

Major Data out Today
N/A

Live IB rates at 9.27 am UK
GBP – EURO 1.161
GBP - USD 1.444
GBP- AUD 1.742
EURO - USD 1.243

[PhilBen]

The pound gained yesterday morning after the release of upward revisions to Q1 GDP. UK GDP came out at 0.3% up from the previous 0.2% estimate although reaction was slow as the Boe minutes last week had already alluded to an improved growth figure. Gains were capped overnight though as analysts warned that any improvements in growth were greatly dependent on temporary factors and inflation remained high. Stronger US data kept the dollar supported as increased consumer confidence gave the view of a continued recovery.
The Euro did see some support as speculators began to square off their any short euro positions, the single currency has managed to maintain gains overnight and with German consumer confidence broadly in line with forecasts this morning the single currency has settled into ranges.

Major Data out Today
FR INSEE Business Confidence
UK BBA Mortgage Approvals
US Durable goods orders
US Durables ex defence
US Durables ex transport
US New Home Sales

Live IB rates at 9.30 am UK
GBP – EURO 1.168
GBP - USD 1.438
GBP- AUD 1.738
EURO - USD 1.231

[PhilBen]

The Euro remains under pressure as concerns over the financial stability continues to hunt the Euro Zone. This is giving sterling a good platform to move in an upward trend and to the highest levels we have seen for some time. Spain’s central bank taking control of one of the country’s smaller banks sparked the latest round of fear selling, as the ability of EU banks to fund themselves was again questioned. Even more pressure for the single currency came as a rumour began to circulate that China was reassessing EU debt holdings as the risks in Europe continue to increase. Speculators also are still playing their part in EUR/USD movements as euro weakness reached levels that were deemed to be excessive by the market. US data yesterday came out better than expected giving further evidence that the recovery in the States remains on track and that the crisis in Europe would not negatively impact the US. Durable goods orders increased to 2.9% from 0.0% while new home sales increased to 504K from 439K.

Major Data out Today
DE CPI (P)
DE HICP (P)
US GDP Annualized (P)
US Core PCE Price Index (P)

Live IB rates at 10.30 am UK
GBP – EURO 1.182
GBP - USD 1.451
GBP- AUD 1.736
EURO - USD 1.227

[PhilBen]

Sterling and the Euro recovered against the dollar as UK and US markets returned from the holidays. German retail sales figures fell to -3.1% from 3.7% previously and initially weighed heavily on the single currency. Other European data released was largely positive giving the Euro much needed support and kicking off a round of profit-taking in EUR/USD trade. UK PMI manufacturing for May remained at 58 against a forecast of 57.5 which helped the pound but the announcement by Prudential that it would be abandoning its $35.5bln takeover bid for AIG’s Asian operations that pushed sterling to a 3 week high against the dollar.

The pound has slipped slightly this morning as UK mortgage approvals came out only marginally higher than expected and risk aversion resumes on lower European stock markets which have triggered profit taking on sterling gains from yesterday. Only US pending home sales are now to be released this afternoon.

Major Data out Today
EURO PPI
US Pending home sales

Live IB rates at 10.00 am UK
GBP – EURO 1.20
GBP - USD 1.467
GBP- AUD 1.765
EURO - USD 1.222