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Bloodbath in equity markets see’s 2—3.5% fall and leads to a dollar rally

After Wall Streets brutal session overnight, Asian bourses are following suit with their own bloodbath over European debt worries. This saw the greenback rally against the majors as risk aversion gripped the mar¬kets, sending the dollar through the $1.30 level against the euro and below the $1.51 level against sterling. The relationship between a rising dollar and falling equity market remains as the DJ saw a close down 225pts (2.02%) and Nasdaq closing down 74 pts (2.98%). The international turmoil gripping world markets have seen funds flow back into the dollar as a safe haven move, also as US investors prefer to invest  at home with com¬panies they understand and government policies they might not like, but feel they have some control over. They have problems in the US too, but people seem to prefer the devil they know. Data: 12.30: Challenger Job Cuts. 13.15: ADP Non-farm Employment Change 29k from –23k. 15.00: ism Non-Manu PMI 56.1 from 55.4    


Sterling had a mixed day yesterday, but at least a portion of our clients saw a benefit as the pound took to an eight and a half month high against a battered euro to trade at 1.1670. Now it would be nice to think this was the pounds own doing, but blatantly its not as TV pictures continue to cover the growing dissent spreading through Greece as it try’s to come to terms with paying of its massive debts. The worry for global markets is the potential for the worries to spread to other European countries, which is continuing to put pressure on the single currency. The pound is not without its own demons, as a hung parliament in the UK continues to weigh over the UK currency, and with only a few days left before we go to the polls, fears of how the UK will tackle its own debt issues remain. This has been seen somewhat in the value of cable, as we have now seen a dramatic fall in the value of GBP/USD by two cents to reach the $1.51 level. In the UK, resource issues in particular have seen pressure, dragging down the FTSE, while BP remains on the defensive in combating its massive oil well leak in the Gulf of Mexico. Data 09.30: PMI Construction 53.5 from 53.1.

The euro  sank to multi month lows against sterling yesterday and a one-year low against the dollar as the single unit took a hit as anti-austerity strikes in Greece and eurozone debt contagion fears spooked the mar¬ket. Traders were sceptical that the Greece bailout would pass muster “due to the protest in Greece”. Today in Greece, thousands of workers are to join a nationwide strike, while Greek parliament is expected to vote on the deeply unpopular measures on Thursday and European leaders hold a summit to approve the bailout on Friday. Investors continue to fret over the viability of the Greece debt bailout and its potential impact on future fiscal problems elsewhere in the eurozone. The EU/IMF bailout of Greece provides enough funding for the next 12 months or so, however the ability and willingness to bail another eurozone fiscal miscreant is politically difficult. Amid market fears that Spain could be next to face a fiscal crises, Spanish PM Luis Zapatero insisted in Brus¬sels that “any speculation on the eurozone is totally unfounded and irresponsible. Data 09.00: PMI Final Ser.
55.6 from 55.5. 10.00: E/Zone Retail Sales 0.1% from –0.6%Speakers: 09.30: Buba President Webber.


• Oil prices are lower because of a stronger dollar as worries grew that Greece’s debt crises could spread to other eurozone economies and reduce demand. New York’s main contract was trading at $82.43.

• Spot gold is at $1,168.20 per troy ounce, down $4 from Tuesday’s New York close. When the dollar really gets going, and when asset liquidations are triggered in the wake of generalized aversion to risk, then gold isn’t immune to such declines.


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GBP/USD 1.5156
GBP/EUR 1.1670
EUR/USD 1.2947
GBP/JPY 143.41
GBP/AUD 1.6685
GBP/NZD 2.1051
GBP/ZAR 11.4871
GBP/CHF 1.6768
GBP/CAD 1.5568
GBP/SGD 2.0977
GBP/THB 48.98
GBP/HKD 11.7701 red-down; blue-up (snap shot)

These rates are for indication purposes only.


For more information or to get the latest spot rates contact:

John Paul Georgiou
Senior Foreign Exchange Broker
+44 (0)20 7959 6851