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Dollar stages biggest rally in nearly three weeks as S&P 500 falters

Pound: The British Pound broke out of the narrow range carried over from the previous week and the sterling may face additional headwinds over the near-term as the slowing recovery in Britain dampens the prospects for a Bank of England rate hike. As growth and inflation in the U.K. cools, the BoE may see scope to support the real economy for most of 2011, and the central bank may adopt a highly dovish tone in its policy meeting min¬utes due out on June 22 as it aims to balance the risks for the region. A survey by the BoE showed consumer inflation expectations fell for the first time since February 2009, with Britons expecting price growth to increase an annualized 3.9% over the next 12-months, and the MPC may see scope to expand monetary policy further in the coming months given the ongoing weakness within the private sector. Investors continue to see borrowing costs in the U.K. increase by 25bp over the next 12-months according to Credit Suisse overnight index swaps, but rate expectations may deteriorate in the days ahead should BoE Governor Mervyn King talk up speculation for a further expansion in quantitative easing.
DATA : No major data to be released today.            
Euro: We have become quite acclimated to officials’ efforts to buy time on the Euro-area’s financial struggle without solving the underlying problem. It is this familiarity that has led the market to treat the progression of a contentious Portuguese bailout (still not finalized), Ireland ire for better rates on its rescue loans (still not final-ized) and the dawning reality that Greece will not be able to make it through 2012 without a dramatic save (certainly not finalized). Yet, at some point, the kick-the-can-down-the-road strategy will no longer work and in-vestors will eventually have to take a loss. When the government can no longer keep the burden of reality off investors’ shoulders, market confidence will come crashing down. With Germany resolute in its demands for private investors to share losses or roll debt forward seven years and Trichet stated the ECB has no intention of rolling out its own Greek holdings.
DATA : No major data to be released today.    

Dollar:  It was a remarkable ending to the week for the greenback. Friday’s 0.8 percent rally for the Dow Jones FXCM Dollar Index was the best run in nearly three weeks while the overall performance for the week was the strongest in a month. This kind of momentum would lead anyone to believe that the currency has positioned itself for a tremendous bull run through the rest of June. It is easy to jump on this bandwagon considering how far the greenback has been pushed over the past months and the build up of fundamental considerations for its recovery. However, we should truly consider the thrust behind this move before throwing in our full support. Has risk appetite truly collapsed on itself, are US rates finally past the point of recovery or is the situation in the Euro-area so dire that capital is fleeing to its most liquid counterpart? If one of these three catalysts haven’t triggered then the greenbacks recovery may be severely faulted this week.
DATA : No major data to be released today.            

Trading activity picked up for gold through the final trading session of this past week but it wasn’t enough to convince us of a new trend. Volatility and volume are still exceptionally low as the now familiar bull trend has shown little trouble with consistency. Wobbles won’t really turn to serious reversals until the dollar is ready to draw capital back from the non-interest-bearing metal through higher rates of its own.


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GBP/USD                        1.6235

GBP/EUR                        1.1308

EUR/USD                        1.4355

GBP/JPY                         130.54

GBP/AUD                        1.5370

GBP/NZD                         1.9931

GBP/ZAR                         11.0401

GBP/CHF                         1.3713

GBP/CAD                        1.5834

GBP/SGD                        2.0078

GBP/THB                         49.21

GBP/HKD                        12.6401

red-down; blue-up (snap shot)

These rates are for indication purposes only.


For more information or to get the latest spot rates contact:

John Paul Georgiou

Senior Foreign Exchange Broker

+44 (0) 20 7959 6917      


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