US Dollar:
The dollar is lower against the majors Monday, but technical levels may see some support for the greenback should they be hit. Asian stock markets traded higher, with robust gains in Wall Street futures, new capital rules and China data proving support, all leading to a sell off in the lower yielding currencies including the yen and dollar. US equities continued their rise from Friday, putting the market in positive territory for the second-straight week. The greenback has now given up over one and a half cents against a resurgent single currency and a cent to the pound. No major data.
Pound:
Investors reacted positively to the new Basel capital standards for banks and to China’s economic data, with the new rules giving banks several years to adapt to the new rules. This saw funds flow out of the normal safe ha¬ven trades, pushing currencies such as the pound higher against the yen and greenback. This saw cable push higher by over a cent to hit the $1.5450 level. The pounds position against the euro has seen a reversal this morning, after the end of the weeks decline to push GBP/EUR down to 1.2035. The euro has also gained on a rise in risk on trades which has seen the pound struggle against its European counterpart. Looking further down the line, sterling may find itself under pressure come October as the UK coalition release their austerity cuts and people find out exactly who in the public sector may lose their jobs. At the weekend, union leaders warned of strikes to oppose such cuts. The government will face co-ordinated industrial action and civil disobedience once the true scale of its budget cuts become clear, with union leaders warning 150,000.00 public sector job losses are already in the pipeline. No data today but Nationwide Consumer Confidence out just after midnight.
Euro: The euro performed well against sterling towards the end of the week and we have now seen the single currency make back gains over the greenback. A return of risk appetite in global markets was sparked by a rise in CPI data from China, then helped by a positive reaction from investors regarding the Basel III agreement. Players sold the dollar in favour of the euro to give EUR/USD a one and a half cent move to trade at $1.28. There was also gains for the euro over sterling as we saw EUR/GBP fall under the 0.83 level. This currency pair seem to be cancelling each other out at present and we have seen tight range trading for some time now. News that Deutsche Bank is set to announce a rights issue sparked renewed concerns about the health of the Euro¬pean banking sector, with such news normally weakening that currency. But the pound is not having it all its own way, as fears of strikes over budget cuts in the UK are weighing heavily on the pound, keeping EUR/GBP higher. Looking ahead to this week’s events, The ZEW survey of German business expectations Tuesday is expected to hold steady in September with various factors cancelling each other out, although some economists forecast a slight weakening. Data 09.00: ECB Monthly Bulletin.
General:
• China’s inflation grew at its fastest pace in two years as severe weather pushed up food prices. The fig¬ure marked the 10th straight month that the CPI, a key measure of inflation, has risen, but analysts said they did not think it would be enough to prompt policymakers to raise interest rates. This move is signifi¬cant for currency markets as it has seen the dollar and yen sold off in favour of higher yielding curren¬cies.
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| GBP/USD | 1.5455 |
| GBP/EUR | 1.2062 |
| EUR/USD | 1.2808 |
| GBP/JPY | 129.69 |
| GBP/AUD | 1.6581 |
| GBP/NZD | 2.1080 |
| GBP/ZAR | 11.0407 |
| GBP/CHF | 1.5705 |
| GBP/CAD | 1.5945 |
| GBP/SGD | 2.0681 |
| GBP/THB | 47.52 |
| GBP/HKD | 12.0021 red-down; blue-up (snap shot) |
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