US Dollar:
Wall Street futures are mixed Friday after US stocks gained for a third straight session Thursday, on a bigger than expected drop in weekly jobless claims and improved same store sales from a number of retailers. The dollar was sold off against its rivals as investors crept out of safe haven currencies and took on more of a bullish stance. The number of Americans claiming long term unemployment benefit has now slipped back to levels not seen since November 2008 in a small sign that the US labor market may be beginning to turn the corner. The Pamplona bulls tore through the currency markets to see the greenback give up over a cent to the euro to trade over the $1.27 level, and against the pound a similar move was seen, with GBP/USD testing the $1.52 level. Further dollar losses seem likely near term, as a measure of clam and optimism has returned to the markets.
Data 15.00: Wholesale Inventories m/m 0.4% unchanged.
Pound:
Sterling had a mixed day yesterday as we saw the pound continue to fall against a resurgent euro, but finally saw losses stemmed against a sell off in the dollar. A return of risk in financial markets led to the green-back’s slide which gave cable a much needed boost. Over a cent was put on GBP/USD to see cable trade from $1.51 and test the $1.52 level. The only trouble with the improvement in risk was that the euro also gained on this move. The pound’s decline against the euro was confounded by investors buying the single currency which pushed GBP/EUR down over half a cent, breaking through the $1.20 level. What didn’t help the pound was yes¬terday’s report by the IMF which cuts growth forecasts for Britain’s economy, for both 2010 and 2011, despite reporting improvements in the global outlook. It said Britain's economy will grow by just 1.2% this year and 2.1% next, rather than 1.3% and 2.5% estimated in April. Although the IMF makes no direct link, the downgrades are widely understood to result from spending cuts outlined in the Chancellors emergency Budget last month. The Bank of England left interest rates unchanged at 0.5% and did not change its QE flows. As expected.
Data 09.30: PPI Input m/m expected 0.1% from –0.6% & Trade Balance –7.1B from –7.3B.
Euro:
The euro is taking a breather against the dollar, weakening slightly in Asian trade after tapping a two month high of $1.2713 in US trade Thursday. Markets are starting to feel a little more at ease with what's going on in Europe, helping the euro strengthen against its competitors which saw the euro continue its rise against sterling. After the results of stress tests on financial institutions come through in late July, the euros direction should be clearer. Once we’re through all that, we’ll have a pretty good understanding of whether the euro is going to fall back toward the more than four year low it hit in June of $1.1876, or whether it will extend toward $1.30. This will also help us gauge how the euro will perform against the pound. European Central Bank President Jean Claude Trichet’s speech after the ECB left interest rates unchanged offered nothing new for investors to trade on. No one had great or big expectations for this ECB meeting or press conference. Instead investors are ze¬roed in on the results of stress tests of European banks, due July 23rd.
Data 09.00: Italian Industrial production m/m 0.7% from 1.0%.
General:
• The Swiss National Bank may have lost up to 10bn Swiss francs from huge interventions in the currency markets to restrain the value of the franc, reports in the FT.
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| GBP/USD | 1.5190 |
| GBP/EUR | 1.2322 |
| EUR/USD | 1.2695 |
| GBP/JPY | 134.29 |
| GBP/AUD | 1.7354 |
| GBP/NZD | 2.1464 |
| GBP/ZAR | 11.4975 |
| GBP/CHF | 1.5977 |
| GBP/CAD | 1.5345 |
| GBP/SGD | 2.0940 |
| GBP/THB | 49.08 |
| GBP/HKD | 11.8238 red-down; blue-up (snap shot) |
These rates are for indication purposes
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John Paul Georgiou
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