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Australian dollar weakens as Bank sees softer inflation

Pound:  There is a swell of economic data due for the U.K this week but the major focus will be on Thursday. We start that day with the publication of both manufacturing and industrial production figures  and whilst these figures might prove slightly bullish for Sterling this will only be a short term trend as the MPC announce their rate decision at midday. They are fully expected to hold rates at the record low of 0.5% while at the same time holding its asset reserve purchase program at £200 billion. This comes despite the fact that the country is facing an inflation rate of 4.5% more than double its target of 2%. Normally an inflation rate this high would signal an increase to the bank rate but policy makers believe that inflationary pressures “will ease once food and oil prices come down”. Further dovish tones by the B.O.E will only further weigh on the pound going forward.                                                                                                           
DATA : 9.30AM Services PMI


Euro: Following the fun and games seen over the last few weeks in regard to the situation in Greece the mar-kets are now trying to look beyond that and all does not look well for the single currency and they are been re-minded of the shaky macroeconomic landscape emerging in the second half of the year. Last week certainly helped emphasise the point as indicators of manufacturing sector activity from across the world’s leading econo¬mies-which are usually good early indicators of where overall growth is headed over the near term-proved largely disappointing. Chinese factory sector growth slumped to the weakest post great recession level and the final revision of the analogous reading for Germany-the leading European economy-downgraded the pace of activity from an already alarming initial result and a similar gauge from the UK printed dramatically below expec¬tations. The only country to snap the trend was the US with their manufacturing gauge posting an increase fol¬lowing a three month losing streak despite market expectations of a decline.
DATA : No major data due today


Dollar: It was a strange start to the week for the dollar as on the one hand we had significant fundamental event risk headed up by the ongoing Greek bailout saga while at the same time liquidity conditions were distorted by the absence of US market participation due to the extended Independence Day holiday weekend. The combination of these two developments saw a market high on volatility but low on meaningful follow through. We saw gains for the greenback against both Sterling and the Euro but this was countered with losses posted against the YEN, CHF and NZD.
DATA : No major data to be released today.


General: The Reserve Bank of Australia held its benchmark rate at 4.75% for the seventh month in a row citing reduced inflation expectations. However, worries that the global economy may grow slower than previously expected sapped risk appetite and bids for the AUD.


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GBP/USD                        1.6010

GBP/EUR                        1.1060

EUR/USD                        1.4470

GBP/JPY                         129.85

GBP/AUD                        1.4980

GBP/NZD                         1.9325

GBP/ZAR                         10.7980

GBP/CHF                         1.3570

GBP/CAD                        1.5400

GBP/SGD                        1.9650

GBP/THB                         48.76

GBP/HKD                        12.4610

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These rates are for indication purposes only


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John Paul Georgiou

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