US Dollar:
The capital markets were relatively tame Wednesday and speculative-friendly equities put in for a significant advance. And yet, the US dollar would still end the day higher. Having advanced for two consecutive sessions following Monday’s dramatic reversal, the Dollar Index is just off of the 12-month highs established last week during the height of market-based panic. Looking across the majors, the same sense of revived strength can be seen in the most liquid pairs. Considering the benchmarks for other growth-sensitive asset classes are still well off their respective highs, the currency’s strength can be partially attributed to an immediate desire for safety of funds. However, the fundamental vein must run deeper than a simple aversion to risk because there has been a general stabilization and recapitalization in those markets that appreciate with investor optimism after last week’s turmoil. An isolated assessment of the US and its currency yields little to be impressed with. The pace of expansion reportedly cooled in the first quarter, the nation’s debt burden has grown to record levels and interest rate expectations are the most dovish we have seen in six months. Though, we must remember that everything in the currency market is relative. Using the standards of economic health, yields and fiscal trou¬bles, the United States is notably in a better position than its primary counterpart: the European Union. As long as this comparison is maintained, the greenback will find a natural source of buoyancy.
DATA : Fed Chairman Brenanke speaks and Unemployment claims.
Pound:
It would seem that event risk would have supported a rally from sterling; and yet the currency would end the day lower across the board. The top scheduled release was the labour data for April. Jobless claims dropped for the fifth time in six months by 27,100-filings while earnings growth through March accelerated to a 4.0 percent clip. What’s more, after setting a coalition, new Prime Minister David Cameron vowed an emergency budget cut of 6 billion pounds within 50 days. This would be an impressive round of data had the BoE’s quar¬terly inflation report had suggested risks had “increased” and rates would remain at record lows for the rest of the year.
DATA : Trade balance
Euro:
With each daily advance that the capital markets take in the aftermath of this past week’s volatility, it is an inherent vote of confidence for a happy resolution to the European Union’s effort to stabilize its finances. Since the 750 billion euro joint rescue program was announced this past weekend, there has been no real test as to the availability of the capital or its ability to calm investors’ fears. Taking advantage of the relative stability, Portugal sold 1 billion euros in debt with a yield that was 181 basis points off the record set last week while at¬tracting a bid-to-cover ratio of 1.8. Yet this is relatively minor. A real trial could be Greece’s need to tap its credit line to cover 8.5 billion euros in debt maturing on the 19th. Today, the nation’s unions called a 24 hour strike in protest pension reform – a requirement for receiving EU and IMF funds. With the struggle curb government ex¬penditures and raise taxes, we must not forget the importance of economic health. Robust activity could in¬crease revenues and retract the need for assistance. On the other hand, too strict of an approach to finances could choke off activity, further diminish the nation’s ability to pay off its debts and lead to social unrest. With an eye on this balance, the preliminary readings on 1Q GDP were relatively strong. The Euro Zone grew 0.2 per¬cent through the three months to put the annual gauge of activity into the positive for the first time since the sec¬ond quarter of 2008. However, this is a review of economic health before the word ‘crisis’ stained the region.
DATA : No major data to be released today.
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| GBP/USD | 1.4907 |
| GBP/EUR | 1.1753 |
| EUR/USD | 1.2677 |
| GBP/JPY | 139.36 |
| GBP/AUD | 1.6514 |
| GBP/NZD | 2.0716 |
| GBP/ZAR | 11.0777 |
| GBP/CHF | 1.6528 |
| GBP/CAD | 1.5065 |
| GBP/SGD | 2.0524 |
| GBP/THB | 47.977 |
| GBP/HKD | 11.952 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
john.georgiou@voltrexfx.com