European banks brace for stress test

 US Dollar:
Investors are likely to play it safe Friday, leaving the stock markets mixed and currency markets trading in nar-row ranges to start pending the stress test results for 91 European banks. After yesterdays relatively solid eco-nomic data both in the US and Europe aligned with strong corporate earnings news to boost stocks, the dollar gave up recent gains as players moved out of so called safe heaven currencies including the greenback and yen and into other leading currencies. This has helped to ease the conflicting picture and invigorate appetite for risk. Better than expected data on US existing home sales and strong earnings data from caterpillar, 3M and United Parcel Services helped appetite for risk increase. Just under one and a half cents was given up against sterling to push GBP/USD towards the $1.53 level. Against the euro a similar value was lost to push EUR/USD over the $1.29 level.
No major data.    
    

Pound:

Sterling was a mixed bag yesterday with gains posted on the greenback but a fall was posted against a resurgent single currency. Better than expected UK retails sales figures were welcomed and economic data seen in the US also helped the pound rally against its US counterpart. Appetite for risk increased, pushing the safe haven dollar lower to rally cable towards the $1.53 level. A reversal in trading patterns was seen in GBP/ EUR as the single currency also benefitted from a gain in risk, pushing the pound down against the euro. Strong consumer confidence data in the eurozone also saw the pound slide on the euro. Looking ahead to today, ster¬ling is expected to hold little changed in narrow ranges against the euro and dollar, while traders play it safe ahead of the bank stress tests. Data wise we have the preliminary estimate of second quarter gross domestic product due, expected to be much stringer than the past there quarters, boosted by consumer spending and industrial output.
Data 09.30: Prelim GDP q/q expected 0.6% from 0.3% & BBA Mortgage Approvals 37.0k from 36.7k.

Euro:
The euro is in a holding pattern Friday as investors wait for results of stress tests on the health of European banks, however the market is posed to shift into safe haven currencies such as the yen and dollar should the test results disappoint. Reports are mixed as to how the test results will come out, with some already saying a number of Spanish banks have failed the tests, but there is also the view that the overall report will show the European banking system is largely in good health. The results may still way on the euro as some participants have become more nervous about the results compared to the start of the week. Yesterday did see a boost for the euro as strong economic data both from the US and Europe gave a boost to the risk trade, helping the sin-gle currency rally against its counterparts. E/zone consumer confidence came in at –14 from an expected worse figure of –17.  Germany's Ifo survey is expected to drop back a little in July, with the governments fiscal auster¬ity plans likely to have depressed business expectations.
Data 09.00: German Ifo Business Climate expected 101.5 from 101.8. tentative: Bank Stress test Results.

 

General:
• Oil prices dipped in Asian trade after an oversight surge as investors awaited European banking stress test results. New York’s main contract was down 14 cents at $79.16 a barrel.

 

 

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GBP/USD	1.5325
GBP/EUR	1.1901
EUR/USD	1.2882
GBP/JPY	133.27
GBP/AUD	1.7152
GBP/NZD	2.1122
GBP/ZAR	11.4201
GBP/CHF	1.5993
GBP/CAD	1.5879
GBP/SGD	2.1033
GBP/THB	49.40
GBP/HKD	11.9015 red-down; blue-up (snap shot)

These rates are for indication purposes

 

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