US Dollar:
The green back was gently sold across the board yesterday as markets bounced back from ex-treme lows against both the Euro and Pound. Some traders have started to believe this might be the short term bottom we’ve been looking for while others think this is a pause for breath before the onslaught begins again. The dollar has strengthened over 7% against the Euro and nearly 6% against sterling this month and we see little data in the fundamental picture that will change outlook. Data out this week includes the Producer Price Index and the Consumer Price Index which will feed into interest rate expectations but we feel that risk appetite or rather the lack of it will remain the fundamental driver of price for the foreseeable future.
DATA – PPI MoM/YoY (APR) USD Housing Starts (APR)
Pound:
Sterling plumbed new lows against the Dollar yesterday as the markets were spooked by the new chancellor issuing a stark warning about the state of the UK public finances. George Osborne's comments in the Financial Times about finding various skeletons in the closet and the irresponsibly of the Labour government sent the cable rate sinking to a 14 month low of 1.4250. He has also announced an emergency budget to take place on the 22nd of June and is widely expected to bring in sweeping cuts to bring the deficit under control. Although this is viewed as a necessary and welcome step, the benefit for Sterling trades wont be felt immedi¬ately as the deep cuts will probably affect growth in the UK, keeping interests rates low for the foreseeable fu¬ture and therefore giving other currencies, namely the Dollar an yield advantage. Sterling has faired a lot better against the Euro in recent weeks, holding onto the 1.17 rate with a view to pushing above the multi year high of
1.1870 Because of its geographical location we also expect the Pound to remain pressured as the EuroZone debt crisis plays out but this should cause a break above 1.20 for GBP EUR. A rate most UK importers will be smiling at. Data today is in the form of UK inflation data. A strong figure will support the Pound on the short term but any benefit is likely to be short lived
DATA – GBP CPI MoM/YoY (APR), GBP RPI MoM/YoY (APR)
Euro:
The Euro broke below the 2008 low (1.2328) and slipped to 1.2235 during the overnight trade as inves-tors scaled back their appetite for risk, and the single-currency may continue to trend lower as market partici-pants remain sceptical that the European rescue plan will be enough to stem the downside risks for the region. Meanwhile European Central Bank board member addressed fears surrounding the crisis and said that “nobody is questioning the euro” during an interview with a radio station in Austria. At the same time, board member Nowotny argued that slower growth remains the main problem for the euro-region as inflation remains subdued, and noted that the single-currency is in a “safe, normal range” against the U.S. dollar despite the recent drop in the exchange rate. We feel that the EuroZone debt story will be playing out for some considerable time, sup¬pressing interest rates and turning the Euro into a funding currency, in turn creating more selling pressure.
DATA— GER ZEW (MAY) EUR CPI MoM/YoY APR
General:
• Crude prices recovered slightly yesterday after reaching 69.27 Dollars a barrel, its lowest level since Oct 5th 2009. Traders have become increasing concerned about demand as sovereign debt woes begin to affect growth projections for the global recovery.
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| GBP/USD | 1.4466 |
| GBP/EUR | 1.1680 |
| EUR/USD | 1.2375 |
| GBP/JPY | 134.10 |
| GBP/AUD | 1.6520 |
| GBP/NZD | 2.0675 |
| GBP/ZAR | 10.8715 |
| GBP/CHF | 1.6395 |
| GBP/CAD | 1.4870 |
| GBP/SGD | 2.0083 |
| GBP/THB | 46.48 |
| GBP/HKD | 11.2742 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