Pound:
A tough week continues for sterling, as before markets opened this morning we saw a small rest bite in cable with GBP/EUR trading sideways, albeit to the downside. The sell-off in the value of the dollar has helped cable post more gains this week as we saw GBP/USD trade in the $1.6450 range. Stocks advanced after ECB President signalled his support for Greek government bond rollovers, lifting demand for riskier assets. Sterling gained versus the dollar for the third day in four. Data showed UK home prices rose 0.1% in May, following a 1.4% decline the previous month. The pounds advance against the greenback, which looks relatively weak across the board, is in stark contract to GBP/EUR. The pound weakened for a sixth day against the euro, as sterling touched its weakest level on record today in Bloomberg Correlation Weighted Currency Indexes, a measure of 10 developed-market currencies. The big move this morning came as a shock to the markets, as market chatter that Moody’s may lower the UK’s rating, sending the pound spiralling down against most major currencies. Half a cent was lost immediately against the single currency as we fell below the 1.1150 level, starting out the morning session trading just above 1.12. Moody’s have since tried to calm market fears by saying they think the UK outlook is stable.
No major data.
Euro:
Yet another strong performance was posted by the single currency yesterday which continues to fly in the face of most peoples expectations on the euro considering the debt concerns raging through certain Southern European countries. With this in mind, surprising as it may be, the euro could soon challenge $1.50 versus the dollar and continue its advance on sterling if the ECB, as expected, on Thursday signals that it intends to raise interest rates next month. The common currency, which reached a one-month high against the dollar on Tuesday, continues to benefit from the contrast between strong eurozone economic data and a US economic recovery that keeps getting squishier, as last weeks jobs report underscored. Even continued worries about the finances of parts of the eurozone haven’t dampened enthusiasm. It looks likely that we will see $1.50 before we see $1.39, probably within the next few weeks. Moreover the euro could continue to rally without any hawkish remarks from ECB President Jean-Claude Trichet on Thursday. If anything, Trichet can surprise to the upside. Solidifying of expectations that rates will rise next month could take the euro up to around $1.49, but a shock delay could see it slide to $1.40. With eurozone consumer price inflation running at 2.7% in May, well above the 2% ceiling considered compatible with the ECB’s mandate to ensure price stability, Mr Trichet is expected to say Thursday that “strong vigilance” on prices is warranted. Thus is a trigger phrase the central bank has used often in the past to flag rate increases.
No major data.
Dollar:
The dollar continued its sell-off against a basket of currencies yesterday and has continued into today’s early trading session. There is still increasing market chatter that the US Federal Reserve may opt after all for a third program of quantitative easing, which is putting pressure on the greenback. However, last nights comments by Federal Chairman Ben Bernanke kept equities in check and he said accommodative policies are still required for the US economy, saying QE2 will end as scheduled and seem to dash hopes of QE3. Adding the recovery was recovering at a moderate pace and frustratingly low, and implying price stability is a more important Fed objective.
No major data.
General:
• The Aussie and Kiwi dollars fell as lingering concern over Europe's debt crises and the US economy dampened de¬mand for growth-sensitive currencies.
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GBP/USD 1.6369
GBP/EUR 1.1150
EUR/USD 1.4670
GBP/JPY 130.77
GBP/AUD 1.5368
GBP/NZD 2.0056
GBP/ZAR 11.0329
GBP/CHF 1.3687
GBP/CAD 1.6023
GBP/SGD 2.0148
GBP/THB 49.63
GBP/HKD 12.7401
red-down; blue-up (snap shot)
These rates are for indication purposes only.
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