US Dollar:
With yet another aggressive selling effort by the market at large, EURUSD has overtaken the closely monitored 1.35 level. From a technical perspective this figure marked the midpoint of the greenback’s remark¬able rally between November and June. Yet, the influence of this shift is more psychological in nature. It repre¬sents one less opportunity for holdout dollar bulls to fight prevailing capital flows. On the other hand, the break of a technical level and capitulation of another portion of a dwindling bullish sect does not immediately guaran¬tee a renewed bear trend for the greenback. Momentum is a unique factor in this equation that requires funda¬mental encouragement. That being the case, we look at the lack of progress made by the S&P 500, corporate bonds and speculative commodities and we can see the divergence in the markets that could quickly curb the dollar’s run. If we don’t see a meaningful acceleration in investor optimism to further lure capital out of safe ha¬vens like the dollar, the dollar’s tumble could quickly stall.
DATA : No major data to be released today
Pound:
Sterling fell on Tuesday after hitting a seven-week high against the dollar as dovish remarks by Bank of England policymaker Adam Posen wiped out gains made after firmer UK retail sales and current account data. Posen said the central bank should start pumping more money into the economy in order to prevent Britain fal¬ling into the kind of slump Japan did in the 1990s. The remarks helped push the pound to the day's lows of $1.5718 on selling led by short-term players, traders said. By 1512 GMT, sterling was at $1.5787, down 0.2 percent on the day. Posen's comments were quite dovish, and not expected. It adds some probability of more QE and some downside risk to sterling but there are no signs yet of others supporting his views so a lot more has to happen before we see more QE. Bank of England’s policymaker Andrew Sentence said comments pub¬lished on Tuesday there was no need for the central bank to restart quantitative easing. Sentence has voted for an interest rate hike for four months running.
DATA : Net lending and Final mortgage approvals
Euro:
If we were looking at the euro’s performance against the dollar or pound, we would see strength. How-ever, it is important to differentiate actual euro strength from the depreciation of its counterparts. For EURUSD and EURGBP, counter-currency weakness is the more influential factor here. If we looked at event risk for the day, we would see a positive reading from the 29-month high in the German GfK consumer confidence survey but this is not in itself very market moving. More interesting is the steady deterioration in confidence related to the region’s financial health. It looks like Allied Irish bank bailout could actually top 35 billion euros, sending pe¬riphery bond yield soaring. Spain’s poor debt auction reminds us that Moody’s is set to reassess the nation’s rating sometime this week.
DATA : No major data to be released today
General:
• The Australian dollar seems to have everything going for it. Interest rates are high and forecasts are for further hikes within a period where most of its counterparts will remain quiet. Furthermore, with so much financial stress globally, Australia more or less avoided a crisis. Today, we see growth expectations im¬proving through an unexpected 0.6 percent rise in the leading indicators index.
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| GBP/USD | 1.5585 |
| GBP/EUR | 1.1634 |
| EUR/USD | 1.3623 |
| GBP/JPY | 132.42 |
| GBP/AUD | 1.6289 |
| GBP/NZD | 2.1385 |
| GBP/ZAR | 11.0029 |
| GBP/CHF | 1.5427 |
| GBP/CAD | 1.6258 |
| GBP/SGD | 2.0850 |
| GBP/THB | 48.13 |
| GBP/HKD | 12.289 red-down; blue-up (snap shot) |
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John Paul Georgiou
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