Currency Market Update 13/09/10

[PhilBen]

Investor confidence and risk appetite have been boosted over the weekend after the announcement of new banking regulations. Finance ministers meeting in Basel unveiled new rules that would require financial institutions to hold top quality capital totalling 7% of their risk bearing assets. Current requirements are for 2% top quality capital but the increase was less than banks had feared would be required and with an introduction period over the next 5 years does not create a sudden burden on banks’ balance sheets.
In addition to the relief rally seen in Asian markets, oil prices rose 1.3% after the release of Chinese factory orders adding pressure to the U.S. dollar as risk appetite continued to increase; Sterling has appreciated across most majors as the currency is still considered to be a higher risk investment.
There is no local or U.S. data out today. European markets wait the release of E.U. industrial production figures for July, which is expected to show improvement, and U.S. Treasury Secretary Geithner speaks later today.

Live IB rates at 10.00 am UK
GBP – EURO 1.2066
GBP - USD 1.546
GBP- AUD 1.658
EURO - USD 1.281

 

[PhilBen]

Generally upbeat investor sentiment saw the U.S. Dollar trade lower across most of the majors yesterday. Better U.S. employment data last Friday, the boost in Chinese factory orders and a positive outcome from the Finance Ministers meeting in Basel over the weekend combined to drive investor risk appetite higher. The Pound struggled to make gains versus the weaker U.S. dollar and traded at a 1 ½ month low versus the Euro. Markets are still uncertain about the economic impact that the pending public spending cuts could have on the recovery and with ever present threats of industrial action traders are steering clear of the Pound.
Commodity markets provided some direction to cable trade as profit-taking on advances in the oil prices and higher gold prices pushed the Dollar briefly higher but a reversal in trend kept ranges intact and resulted in lacklustre trading on Sterling.
Today sees the release of U.K. CPI data, inflation y/y is expected to ease slightly which, given the present sentiment towards the Pound is unlikely to shift ranges. German ZEW economic sentiment data and U.S. retail sales are expected to be released later today.


Live IB rates at 11.00 am UK
GBP – EURO 1.199
GBP - USD 1.541
GBP- AUD 1.651
EURO - USD 1.284

 

[PhilBen]

Three days of directionless trading yesterday came to a fairly abrupt halt with the Euro finally breaking through key technical levels. The Euro weakened against the Dollar by 1% in late trade yesterday. This helped move the Pound out of range bound trading as well, strengthening against the US dollar by over 2 cents. Strong movements over night wiped out any gains when the Bank of Japan took action to halt the rise in the value of the Yen.

Tokyo intervened in the decline of the Yen for the first time in over six years. The US Dollar jumped two yen from a 15-year low after Japan intervened to sell Yen. Traders said would only buy time in slowing the yen's rise. The markets appear to continue to favour the strong Yen especially Chinese buyers. Reaction this morning appears only to be centered on when to buy Yen rather than whether to buy. Most traders appear to view this momentary weakening as nothing less than an opportunity to pick up Yen at a discount. The BOJ’s actions helped send the Euro, Australian dollar and Sterling 2 percent higher against the Yen, despite no clear indication that the intervention had utilised anything other than Dollars.

Today there is a full list of economic data releases; we are focused primarily on UK and Euro zone Unemployment and Euro zone Inflation this morning. This afternoon we await U.S Industrial output.

Live IB rates at 10.15 am UK
GBP – EURO 1.194
GBP - USD 1.55
GBP- AUD 1.655
EURO - USD 1.297

 

[PhilBen]

Sterling weakened briefly yesterday morning due to a knee-jerk reaction to the unexpected rise in people claiming unemployment benefits in August. The claimant count change rose to 2,300 in August against a forecast of -3,000 by markets. Downward revisions to the previous figures added further pressure to the Pound.
The negative data was offset by the ILO unemployment rate which remained unchanged at 7.8% in July and the speech by Bank of England Governor Mervyn King who gave no indication that further boosts to money supply were likely in the near term. In his speech King warned that a great deal of uncertainty was still present in global markets and noted consumer and business confidence had weakened recently. A more positive note from the BoE governor was that the central bank was seeing encouraging signs of expansion in manufacturing and exports for the United Kingdom. Sterling rose across the board on the back of Kings speech and received a further boost versus the Dollar after a drop in crude oil stocks fuelled a 1.3% rise in Oil prices.
Today markets await the release of U.K. retail sales and Industrial orders figures while in the U.S. initial jobless claims, TICS capital flows and the Phil Fed business index will be released.


Live IB rates at 9.49 am UK
GBP - EURO 1.193
GBP - USD 1.558
GBP- AUD 1.66
EURO - USD 1.305

 

[PhilBen]

Sterling weakened briefly yesterday morning due to a knee-jerk reaction to the unexpected rise in people claiming unemployment benefits in August. The claimant count change rose to 2,300 in August against a forecast of -3,000 by markets. Downward revisions to the previous figures added further pressure to the Pound.
The negative data was offset by the ILO unemployment rate which remained unchanged at 7.8% in July and the speech by Bank of England Governor Mervyn King who gave no indication that further boosts to money supply were likely in the near term. In his speech King warned that a great deal of uncertainty was still present in global markets and noted consumer and business confidence had weakened recently. A more positive note from the BoE governor was that the central bank was seeing encouraging signs of expansion in manufacturing and exports for the United Kingdom. Sterling rose across the board on the back of Kings speech and received a further boost versus the Dollar after a drop in crude oil stocks fuelled a 1.3% rise in Oil prices.
Today markets await the release of U.K. retail sales and Industrial orders figures while in the U.S. initial jobless claims, TICS capital flows and the Phil Fed business index will be released.


Live IB rates at 10.58 am UK
GBP – EURO 1.195
GBP - USD 1.569
GBP- AUD 1.66
EURO - USD 1.312

 

[PhilBen]

A lack of U.K. economic data saw the pound weaken on Friday after making initial gains versus the dollar on the back of Euro gains; sentiment towards the pound remained slightly negative after the earlier release of weaker U.K. retail sales numbers.
Commodity prices pushed the dollar higher throughout the day as oil prices fell 2.5% after peaking just above $80 per barrel but gains were capped as U.S. economic data came out to the downside. CPI inflation for the U.S. came out in line with expectation while the University of Michigan consumer confidence index dropped to 66.6 from 68.9, market had expected an improvement in confidence numbers.

Sterling remains on the back foot this morning after the overnight release of house data from Rightmove. The house price index showed prices weakening; the index indicated a 2.6% y/y rise in prices compared to the previous month where prices rose by 4.3% y/y. The Euro continues to make gains after Ireland announced it would not require E.U. financial aid to deal with its ailing finance sector.
There is no significant E.U. or U.S. data scheduled for release today but in the U.K. public sector net borrowing figures will be released this morning. The data will be critical in determining future sentiment for the pound and is likely to dictate the trend for sterling trade.


Live IB rates at 10.15 am UK
GBP – EURO 1.191
GBP - USD 1.56
GBP- AUD 1.65
EURO - USD 1.309