US Dollar:
Concern about a U.S. slowdown remains pivotal for markets. It could be quiet until the second quarter GDP figure is released today at 12:30 GMT as it will be this figure that will be taken as definitive proof as to whether all the negative figures we have seen actually add up. Anything indicating a double dip will be seized upon and the market could potentially be extremely volatile this afternoon. In an unusual move, the president of the Fed¬eral Reserve Bank of St. Louis released a paper Thursday warning that the Fed's policy of keeping interest rates near zero during the economic crisis may lead to Japanese-like deflation in coming years.
"Promising to remain at zero for a long time is a double-edged sword," he warned, saying that the Fed's effort to stimulate the economy that way may have the unintended consequence of anchoring expectations for falling prices. Bullard is viewed as an “inflation hawk” so the question leads to what are the “doves” thinking? There aren’t many weapons left in the locker if this is the concern so maybe more QE is on the way in the US which would suggest USD weakening. If this were to become the world’s number one concern where does the flight to safety take place? Do they still flock to T bills, or do they find a new destination to park their money?
Data: 12:30 Q2 GDP (initial)
Pound:
Sterling, now a shade firmer against the Dollar and Euro, is likely to consolidate against those currencies pend¬ing the US Data later. The recent data released out of UK has been tepid despite the extremely strong Q2 GDP figures. Its almost as if the markets can’t quiet believe them and therefore how much store do you place on them? BOE Governor King downplaying the figures which suggests interest rate hikes are still some way off, and the figures from across the pond today will either re-indorse that feeling with everyone battening up the hatches for the next round (which is self fulfilling in itself) or people may, if the figures are stronger than ex¬pected, start seeing light at the end of the tunnel and the doomsters will be wheeled away. Consumer confi-dence fell by 3 points to –22 overnight which is the lowest reading since Aug 09, when we were still contracting, another pointer all is not beautiful yet!
Data
Euro:
The euro also slipped against the yen as short-term players pulled out of risk-sensitive assets.
The euro had been perhaps the most visible beneficiary of easing concerns about the European sovereign debt crisis. After hitting a four-year low of $1.1876 on June 7, the currency has steadily gained ground amid confi¬dence that policy makers have forestalled a European sovereign debt default. Well-received government debt auctions in countries like Spain and Portugal–where much of the sovereign debt concerns were focused–have teamed up with better-than-expected regional economic data to lead the common currency higher. The suc¬cessful stress tests of European banks have further bolstered the euro.
Data
General:
• HSBC bets on Russia and cools on India in BRIC beauty contest. They believe Russia is well placed to build on low debt as long as the Oil price does not drop too far.
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| GBP/USD | 1.5620 |
| GBP/EUR | 1.1984 |
| EUR/USD | 1.3031 |
| GBP/JPY | 134.76 |
| GBP/AUD | 1.7382 |
| GBP/NZD | 2.1678 |
| GBP/ZAR | 11.474 |
| GBP/CHF | 1.6212 |
| GBP/CAD | 1.6140 |
| GBP/SGD | 2.1250 |
| GBP/THB | 50.32 |
| GBP/HKD | 12.1328 red-down; blue-up (snap shot) |
These rates are for indication purposes
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