US Dollar:
The Dollar dropped yesterday as risk appetite found a strong footing. China’s Saturday release of remarkable retail sale, industrial production and new lending data; global traders were left with the impression that the world’s fastest growing economy could carry the global economy with it. This promoted equity markets to hold on onto their recent gains and even continue the rally. As we have consistently seen over the last 2 years, the course of the Dollar is closely linked to the markets perception of risk and the precarious position of the US deficit is largely ignored. This cannot continue unabated however and with it the Dollars safe haven cur¬rency status will come into question. Scheduled for release today is Advanced retail sales, a key indicator for the US economy. Economist expect sales to have slipped 0.1% percent to a monthly reading of 0.3. A telling sign of the lack of job creation and sentiment among the US populous.
DATA—US Advanced retail sales (AUG)
Pound:
The sterling’s gains were unstable yesterday as investor sentiment alone cannot keep the pound in a bullish trajectory. The British Pound fell back from a high of 1.5487 during the European trade, and the ex-change rate may continue to trend sideways throughout the week as investors wait for the Bank of England pol¬icy meeting minutes due out on September 22. However, as the rise in risk appetite is expected to carry into the U.S. rate, the GBP/USD may work its way back towards the upper bounds of its recent range as market senti¬ment continues to drive price action in the currency market. Sterling will come under pressure this morning as UK House Prices tumbled in August according to a report from the Royal Institute of Chartered Surveyors, with the number of polled real estate agents reporting price declines outnumbering those showing gains by a whop¬ping 32 percent, the most in 15 months. Due today is Augusts’ Consumer Price Index figures are set to show the annual inflation rate slowed to 3 percent, marking the fourth consecutive decline. The outcome promises to reinforce the Bank of England’s sanguine view on the price growth outlook and bolster expectations for a static monetary policy for the foreseeable future.
DATA—CPI MoM/YoY (AUG), RPI MoM/YoY (AUG)
Euro:
It is easy to attribute the euro’s rally yesterday to the improvement in risk appetite. It is true that, being one of the most financially unstable region’s in the world, the euro is especially sensitive to the strength and weakness of investor sentiment. However, encouraging the currency’s strong performance was the European Commission’s semiannual review of economic activity. From the May forecast for 0.9 percent growth in the re-gion through 2010, the group upped their projection to 1.7 percent. This caused EURUSD broke out of the nar-row range from the end of the previous week to cross back above the 20-Day SMA at 1.2749 and GBPEUR to trade back underneath 1.20. While this is generally bullish it should be noted that the ECB had to buy another 237 million Euros in government debt last week and today’s critical German ZEW survey could see the brakes being applied to the Euro bulls
DATA– EU Industrial production MoM/YoY (JUL), GER ZEW Survey (SEP)
General:
Royal Bank of Scotland (RBS) yesterday marked the clearest sign yet that the UK banking sector is recovering .The banking giant will issue £4.7bn of securities backed by mortgages in the first move of its kind since the onset of the financial crisis. The issuance is a vital step for the economic recovery as it allows banks to take loans off their balance sheets, freeing up capital for new lending.
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| GBP/USD | 1.5417 |
| GBP/EUR | 1.2156 |
| EUR/USD | 1.2678 |
| GBP/JPY | 129.03 |
| GBP/AUD | 1.6717 |
| GBP/NZD | 2.1312 |
| GBP/ZAR | 11.1680 |
| GBP/CHF | 1.5631 |
| GBP/CAD | 1.5985 |
| GBP/SGD | 2.0703 |
| GBP/THB | 47.63 |
| GBP/HKD | 11.9820 red-down; blue-up (snap shot) |
For more information or to get the latest spot rates contact:
John Paul Georgiou
Senior Foreign Exchange Broker