US Dollar:
The greenback weakened against most of its major counterparts as investors marginally increased their appetite for risk. The U.S. market was offline yesterday for the Memorial holiday meaning thin market conditions kept the major exchange rates within their current range despite the down grade of Spain by Fitch on Friday. This could have potentially fuelled a huge flight to quality i.e. to US treasury’s but this has not happened. As per the normal course we expect rates to led by risk appetite rather than fundamentals so we may yet see the US dollar strengthen across the board as Europe sinks further into the mire. Data out this week will include the ISM manufacturing survey for May, Pending home sales and the much talked about Non Farm Payroll due on Friday.
DATA—ISM Manufacturing Survey (MAY)
Pound:
The British Pound bounced back during European trade to reach a high of 1.4516, but lack of momentum failed to push the price higher. According to an article in the Guardian newspaper, the British Chambers of Commerce said the U.K. government should leave fiscal tightening on the backburner as the debt crisis in the Euro-Zone intensifies, and went onto say that the Bank of England should support the economy in the second half of the year as the recovery is likely to remain fragile. As economic conditions improve, the BoE may look to increase its economic assessment for future growth, but the ongoing slack within the private sector could lead the central bank to maintain a dovish bias for monetary policy as Governor Mervyn King aims to encourage a sustainable recovery for the U.K. Sterling continues to outperform the Euro as is currently targeting the 12 month high of 1.1891.
Data— PMI Manufacturing (MAY)
Euro:
Despite the public holidays for Brits and Americans, the Europeans were dealing with a considerable level of fundamental activity Monday. Having not been able to properly react to Spain’ downgrade last Friday (as Fitch reported it near the market close), traders were watching closely to see how the markets would respond but rates were decidedly subdued. The balance between staving off a regional financial crisis and capitulating to a sovereign moral hazard was argued yesterday as ECB member Patrick Honohan threw in his support for the central bank’s new policy for purchasing government bonds to ease tension in the Union’s markets. However, his colleague Axel Weber maintained his criticism, suggesting it would invite “stability risks” and must be with-drawn as soon as possible. From financial crisis to event risk; yesterdays data offered little room for bullishness on the growth and interest rate front. While the Euro Zone’s CPI estimate would climb to a 17-month high 1.6 percent clip in May, the M3 money supply reading contracted once again. What’s more, economic confidence slipped for only the second time as things continue to look grim for the single currency.
DATA— GER Employment change MAY, FRA Producer prices MoM/YoY
General:
• Australia keeps it benchmark rate on hold. The central bank's decision today to keep its key cash rate at 4.5 per cent snaps a series of three rises in as many months, and follows a month of turmoil on global financial markets.
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| GBP/USD | 1.4460 |
| GBP/EUR | 1.1870 |
| EUR/USD | 1.2182 |
| GBP/JPY | 131.28 |
| GBP/AUD | 1.7385 |
| GBP/NZD | 2.1479 |
| GBP/ZAR | 11.22489 |
| GBP/CHF | 1.6830 |
| GBP/CAD | 1.5180 |
| GBP/SGD | 2.0405 |
| GBP/THB | 46.78 |
| GBP/HKD | 11.2650 red-down; blue-up (snap shot) |
These rates are for indication purposes
For more information or to get the latest spot rates contact:
John Paul Georgiou
Senior Foreign Exchange Broker
\n john.georgiou@voltrexfx.com