Pound:
The British pound extended its rebound Wednesday on somewhat ambiguous fundamentals. A boost in momentum behind the sterling buying effort lines up nicely to the release of the UK GDP figures. However, as a second reading of the data and given the disappointment in certain details it is difficult to draw the confidence in this move. The headline growth reading offered a 0.5 percent quarterly improvement and 1.8 percent year-over-year improvement that we were originally presented. Yet, it was the details that were valuable here. From those areas that we generally consider to offer sustainable growth, the figures were disappointing. Personal consump¬tion dropped 0.6 percent while investment dropped 4.4 percent through the period. That should set off a few alarms for medium-term growth prospects when we consider it was a 1.0 percent increase in growth and the biggest contribution to activity from net trade on record that kept the underlying figure propped up. MPC mem¬ber Andrew Sentance perhaps added a level of legitimacy to the bullish drive later on when he suggested rate hikes should be implemented now to avoid more dramatic efforts later down the line but like Kocherlakota, the market is well aware of Sentance's position. If this is indeed a based on ethereal factors or mere risk appetite trends the pound could soon lose its buoyancy.
DATA : No major data to be released today.
Euro:
The Euro bounced back from lows to steadily hold above the 100-Day moving average of 1.4180 and rebound in the single-currency may gather pace over the near-term as the OECD sees economic activity in the region increasing 2.0% this year versus projections for a 1.7% expansion back in March. However, Euro Group President Jean-Claude Juncker warned a ‘soft restructuring’ of Greece’s government debt would be not be enough to really address the crisis, and the heightening risk for contagion will continue to bear down on the sin¬gle-currency as policy makers struggle to restore investor confidence. In turn, we should see the European Cen¬tral Bank continue to delay its exit strategy further, and the EUR/USD certainly remains at risk of facing addi¬tional headwinds over the near-term should central bank President Jean-Claude Trichet continue to talk down speculation for another rate hike this year. As the EUR/USD carves out a top in May, we are still looking for a test of the 61.8% Fibonacci retracement from the 2009 high to the 2010 low around 1.3870-90, and the single-currency may struggle to hold its ground throughout the North American trade as there appears to be a shift in market sentiment.
DATA : No major data to be released today.
Dollar:
Currency traders showed a fairly muted reaction to the dismal U.S. Durable Goods Orders report, but the drop in private sector consumption appears to be weighing on market sentiment as it reinforces a weakened outlook for future growth. Demands for large-ticket items weakened the most in six-months, led by a 9.5% de¬cline in transports, and the data could spur demands for the greenback as the rebound in risk appetite falters. However, the ongoing weakness within the world’s largest economy could lead the Federal Reserve to retain a zero interest rate policy throughout the second-half of the year, and the central bank may weigh alternative measures to stimulate the economy as it aims to encourage a sustainable recovery.
DATA : Prelim GDP and Unemployment claims.
General:
• With the greenback steeped in its biggest decline since the month began, there is a new theme to watch. It seems most fundamental signs point to firm gold prices.
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| GBP/USD | 1.6302 |
| GBP/EUR | 1.1488 |
| EUR/USD | 1.4186 |
| GBP/JPY | 133.57 |
| GBP/AUD |
1.5377 |
| GBP/NZD | 2.0154 |
| GBP/ZAR | 11.3506 |
| GBP/CHF |
1.4183 |
| GBP/CAD | 1.5916 |
| GBP/SGD | 2.0249 |
| GBP/THB |
49.23 |
red-down; blue-up (snap shot)
These rates are for indication purposes only.
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John Paul Georgiou
Senior Foreign Exchange Broker
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