US Dollar:
Is it really shocking news that European officials understated the potential risk that its regional banks face? It would seem so given the strong risk aversion move and robust dollar bid that developed Tues-day. However, that wouldn’t hit at the root of the issue. This particular Wall Street Journal article wasn’t the cata¬lyst for the general market like many analysts have idly claimed. Instead, this was a general concern surround¬ing the region that had started to build momentum yesterday. And, to be frank, the issue was not Europe’s fi¬nances but rather, it was a general revival in uncertainty that would target those currencies and regions with the most unstable fundamental futures. It just so happens that the financial media took a special interest in this par¬ticular region yesterday and therefore, the investors’ attention was redirected to this general region. Identifying the source of today’s move as a confidence issue rather than a region-specific catalyst offers far better perspec¬tive into gauging the stability and conviction of the resultant FX trend. Alone, EURUSD would offer a reading of extraordinary velocity in risk aversion with a consistent decline through the day and the biggest close-to-close decline in four weeks. Yet, when we look to the S&P 500, we see a contraction that does little to offset last week’s gains and selling pressure that was heavily front-ended.
DATA : No major data to be released today
Pound:
Fundamental sterling traders would have only a low-level piece of event risk to absorb yesterday which was the BRC inflation index. Far more important a concern for the currency going forward will be the overall health of the economy. Economic performance will further determine interest rates and fiscal policy going for¬ward. From that perspective, no indicator is better suited to define expectations than the NIESR GDP estimate for August. Meanwhile, UK Industrial Production is expected to add 0.4 percent, putting the annual growth rate at 2 percent. On balance, the annualized trend in industrial output has been treading water since March, hinting that the stimulus-driven rebound in the aftermath of the 2008 global credit crunch and recession may have run out of steam.
DATA : Halifax HPI, Manufacturing production and NIESR GDP estimate
Euro:
Significant fundamental concerns or comforts can easily be overlooked depending on the prevailing interests of the speculative ranks. If investors are optimistic, an economically troubled region could be construed as a late bloomer with depressed prices or a prominence of pessimism could lead to a selloff of a relative leader. Today, we would see the shift in backdrop sentiment revive concerns surrounding the Eurozone. There were few actual developments from the region beside new record highs on Irish and Portuguese yield spreads as well as a nationwide strike in France though these are hardly surprising. What currency traders were re¬sponding to were regurgitated stories. The Wall Street Journal’s report that government debt exposure in the EU stress tests was understated and Bloomberg’s stories that Greece had yet to fully disclose the full details of its debt obligations while the Euro region banks will need to raise 240 billion euros through year’s end are well documented. Nonetheless, for an antsy market, these kinds of reports only fuel fear.
DATA : No majour data to be released today
General:
As expected, policy makers at the Reserve Bank of Australia left interest rates untouched for a fourth consecutive meeting. That was fully expected and traders were more than ready to interpret subtle changes in tone to forecast future shifts. Some interpreted Governor Steven’s suggestion that rates are appropriate “for the time being” as a hawkish lean but that is stretching it. Regardless risk trends dominate.
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| GBP/USD | 1.5432 |
| GBP/EUR | 1.2121 |
| EUR/USD | 1.2727 |
| GBP/JPY | 129.20 |
| GBP/AUD | 1.6846 |
| GBP/NZD | 2.1431 |
| GBP/ZAR | 11.224 |
| GBP/CHF | 1.5562 |
| GBP/CAD | 1.6162 |
| GBP/SGD | 2.0775 |
| GBP/THB | 47.65 |
| GBP/HKD | 12.0063 red-down; blue-up (snap shot) |
For more information or to get the latest spot rates contact:
John Paul Georgiou
Senior Foreign Exchange Broker
\n \n John.georgiou@voltrexfx.com