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Dollar declines on Asian stock market gains following Wall Streets rally


US Dollar: The dollar gave up some of its gains made last week against he pound and euro as some risk came back into the market following positive moves in equities. Asian stock markets have started the week mostly higher, taking heart from a firm performance on Wall Street on Friday and buoyed by speculation that the Chi¬nese authorities will ease some of their tightening measures. Last weeks carnage in global markets saw huge swings back in the dollars favour as risk evaporated, mainly on the back of continuing worries spreading through the eurozone on how it will handle its debt levels. The dollar has now stemmed its decline against the euro as news broke that Spain was forced to bail out one of its biggest banks, adding to worries which in turn have seen a swing back in the greenbacks favour. These worries surrounding the eurozone’s debt crises are keeping in¬vestors on edge and prompting a prudent strategy to the favour of lower-yielding safe haven currencies like the buck. Data 15.00: Existing Home Sales expected 5.62m from 5.35m.     

Pound: Sterling is taking its cue from the dollar as risk averse currencies saw a move lower as global risk came back into the market on Friday. Cable has now seen a two cent rise since Thursday and is testing the $1.45 level as investors see equity markets stop the rot from last weeks massive declines. Sterling has even seen the pound halt its fall against the euro, although this was helped by more pressure being dumped on the single cur¬rency in  the form of a Spanish bank being bailout as debt worries continue to haunt the eurozone. Sterling is likely to consolidate in ranges against both the euro and dollar for now. Its support comes from improved risk sentiment, yet remains capped by concerns about protracted slow U.K. growth as the new coalition seeks to cut budget deficit. Among key data, UK first quarter GDP due Tuesday is forecast  to be revised upwards in the second release of the data, boosted by stronger than expected manufacturing output in March. Data: UK Gov¬ernment Announces £6bn in immediate savings. Speakers 18.30: MPC Member Posen

The euro is a bit lower Monday after coming back from its lows of last week on light short-covering. Last weeks rise was all a positioning story as large short (euro) positions were forced to be unwound when risk was taken off the table. Given those positions have now been pared back, there is room for people to sell the euro. Nothing has changed in terms of fundamentals, they are still very negative the euro. The single currency wasn’t helped by fears of further turbulence in the financial markets yesterday after Spain was forced to bailout on of its biggest regional banks, adding to worries about the eurozone. Spain's central bank took operational control of Cajasur, one of 44 large regional lenders that account for about half the Spanish banking market. The interven¬tion has heightened concerns that Spain’s regional lenders could put added strain on its public finances. An¬other story re-appearing to worry the single currency is Hedge funds that made millions from the implosion of America's subprime market are betting on a similarly dramatic collapse of the euro. Hedge funds including Hay¬man Advisors and Matrix Group have told investors that they expect the sovereign debt crises to worsen despite the €110bn (£79bn) bail-out by the IMF, the EU and ECB. No data. Germany and France closed for national holiday—Whit Monday.

• Gold’s overall outlook is positive despite last weeks 5% decline, says Barclays Capital. Spot gold is at $1,183.40 a troy ounce, up $6.40 since Friday’s N.Y close.
• All eyes will be on the announcement by the UK government today with a £6bn spending cut move.


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GBP/USD 1.4373
GBP/EUR 1.1584
EUR/USD 1.2411
GBP/JPY 131.27
GBP/AUD 1.7273
GBP/NZD 2.1154
GBP/ZAR 11.2369
GBP/CHF 1.6540
GBP/CAD 1.5116
GBP/SGD 2.0237
GBP/THB 46.49
GBP/HKD 11.2193 red-down; blue-up (snap shot)

 These rates are for indication purposes


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John Paul Georgiou
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