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EUR/CHF parity once again looks like a plausible scenario

UK Retail Sales headline the economic calendar this morning, with expectations calling for receipts to add 0.3 percent in the year to July, down from 0.4 percent in the previous month. On balance, the narrowly lower out-come is unlikely to stir much of a reaction from the markets given its limited impact for the monetary policy out¬look, Indeed, after yesterday’s dour Bank of England minutes release, it would take a substantial disappoint¬ment to push the traders’ rates forecast even deeper into dovish territory, while an unexpected uptick would likely pass by with little notice. Yesterday we saw decent gains for Sterling against the Euro, topping out at 1.1490 from a low of 1.1352 earlier in the day. Similarly sterling climbed to as high as 1.6590 against the green¬back.
Data 09.30: Retail Sales.


 Behind the scenes of this week’s mini summit in Paris between Angela Markel and Nicolas Sarkozy, a rather more important story was breaking This was the news that the German economic recovery has comprehen-sively stalled, causing growth across Europe as a whole to come to a virtual standstill. Amid the storm clouds of the single currency crisis, the apparently buoyancy of the German economy had been one of the few remaining rays of sunshine. Now that, too, has flickered out. All the warning signs of another economic catastrophe have been there for a long time now, but with policy makers fretting over how to save the euro, they have been ig¬nored, the question might be for how much longer? The single currency started at a low of 1.4325 advancing to a high of 1.4516 against the dollar later in the session.   
No major data due today.


Volatility is likely to pick up in the afternoon, however as US Consumer Price Index figures and the Philadelphia Fed Business Confidence gauge cross the wires. The former is expected to show that headline inflation ex¬pected to drop for the first time in seven months, but moderation here is to be expected as oil prices pull back along with the diminishing outlook for global demand at large. As such, the Core CPI figure should prove more interesting. The metric is forecast to rise to the highest since November 2009, reinforcing the status quo in the outlook for Federal Reserve monetary policy and keeping a lid on QE3 hopes. The latter release is tipped to show business confidence slumped again in August after a shallow bounce in the previous month. Remarks from New York President Bill Dudley are also due to come across the wires.
Data 13.30: Core CPI m/m, Unemployment Claims; 15.00: Existing Home Sales, Philly Fed Manufacturing Index.


• The EUR/CHF parity story still looms large with the peg off the table in the short term, and with Europe’s problems continuing to lurk in the background, the Swiss franc could still benefit from safe haven status.


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GBP/USD                        1.6520

GBP/EUR                        1.1465

EUR/USD                        1.4410

GBP/JPY                         126.50

GBP/AUD                        1.5750

GBP/NZD                         1.9860

GBP/ZAR                         11.7720

GBP/CHF                         1.3140

GBP/CAD                        1.6230

GBP/SGD                        1.9950

GBP/THB                         49.25

GBP/HKD                        12.8730

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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