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Dollar traders balance liquidity concerns against Fed rate decision

Pound: The British Pound pared the decline to 1.6094 before losing some ground as currency traders in-creased their appetite for yields, but the rebound in risk sentiment could taper off during the North American trade should the slew of scheduled event risks reinforce a weakened outlook for future growth. With the Bank of England set to release its policy meeting minutes this week, the sterling may face additional headwinds over the near-term as we expected the central bank to maintain a cautious outlook for the U.K. BoE Governor Mervyn King may show an increased willingness to keep the benchmark interest rate on hold throughout the remainder of the year given the slowdown in the economic recovery, and the MPC may adopt a highly dovish outlook for future policy as growth and inflation cool. In turn, the reversal from 1.6545 may gather pace in the days ahead, and the GBP/USD could work its way back towards 1.6000 to test for near-term support. DATA : No major data to be released today.            
Euro: We took a few sharp turns in our fundamental reading for the euro through this past Friday’s session. Through the morning, the currency was on the rise as news spread that headway was made on EU leaders’ discussion over the Greece situation. German Chancellor Angela Merkel suggested her country was willing to ease off on demands for the troubled nation to roll its debt forward for another seven years before they would entertain the thought of additional support. This seems to open the way for an agreement at Sunday’s meeting of officials to release the next tranche of support for the troubled member. That said, this is in itself a temporary fix. Agreeing to release the next round of support from the first package does not guarantee officials will simply pass the second bailout package and now it seems Greece may look to play hardball. In the meantime, Moody’s put Italy on credit review as the fallout from the Mediterranean nation spreads. DATA : No major data to be released today.    
Dollar: The greenback ended this past week on a notably-weak footing. Though it would be a tidy explanation to simply assign responsibility for the biggest drop in two weeks on the weaker-than-expected reading from the University of Michigan’s consumer sentiment survey, that would ignore the true fundamental currents behind the market. The true culprit behind the stumble is the same that sparked the rally earlier in the week: the global im¬plications of Greece’s financial ‘situation’. When news of the EU member’s political troubles hit the wires Wednesdays, the financial ripples spread quickly as investors scrambled to hedge their exposure to risky Euro¬pean exposure and subsequently taxed the market’s liquidity for short-term funding. This panicked demand for access to capital is the same leverage that pushed the dollar to its heights during the 2008, global financial cri¬sis. Yet, when the need for safety flags, so too does the appetite for the greenback. Despite the pullback after mid-day through the New York session, equities put in for a positive close for the week, while the euro climbed against most of its counterparts. DATA : No major data to be released today.            
In a normal shift in risk capital, the market will likely keep money market and FX capital the same asset class. However, we saw that the move towards safety actually leveraged gold as well. This advance was no doubt helped by scepticism surrounding the Greece bailout compounded by Italy’s rating warning. Furthermore, the downgraded growth outlook from the IMF to 2.5 percent for this year certainly wouldn’t help.    


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GBP/USD                        1.6110

GBP/EUR                        1.1342

EUR/USD                        1.4200

GBP/JPY                         129.10

GBP/AUD                        1.5317

GBP/NZD                         1.9965

GBP/ZAR                         10.9555

GBP/CHF                         1.3680

GBP/CAD                        1.5841

GBP/SGD                        1.9969

GBP/THB                         49.09

GBP/HKD                        12.5553

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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