US Dollar:
The Dollar fell across the board yesterday as equities rallied and risk appetite returned. Cable put in a stellar performance to move from mid 1.49's to trade over 1.52 in Asian trade last night. EURUSD also experienced a similar move despite the backdrop of economic and fiscal issues hanging over the single currency. As for eco-nomic data, increase in the trade deficit and drop in small business optimism should not be a surprise as growth in the US moderates. Today's trade will be firmly geared towards tonight's FOMC meeting and accompanying statement. We don't expect any material change in the language used by the central bank but that wont stop the release being closely analysed .
DATA: Import price index; Advanced Retail Sales; Business Inventories; Crude Oil Inventories
Pound:
Sterling was a mixed bag yesterday, rallying against the USD during NY trading but struggling to gain any trac-tion against the Euro. Inflation data released yesterday morning showed annualised CPI, the governments pre-ferred measure of inflation fell to a rate of 3.2%. this is an improvement on last months figure of 3.4 but still well above the bank of England's target of 2%. This gave sterling bulls something to think about as some market participants believe the bank will need to increase the base rate to bring the inflation reading down. It is widely understood that tightening monetary policy too early could and probably will crush our fragile recovery but yes¬terdays reading will definitely give the members of the rate setting committee something to discuss. Sterling could also push on today as UK unemployment data is released. Jobless Claims are expected to decline 20,000 in June as the jobless rate drops to 4.5 percent – the lowest in 15 months.
DATA : Unemployment rate; Claimant count Rate; Average Weekly Earnings
Euro:
Trading in the Euro yesterday was baffling to say the least. As Moody’s cut Portugal’s credit rating by two notches to A1 from AA2 but maintained a stable outlook, the Euro managed a 1% gain against the USD and held a tight range against the Pound. Portugal is classed as one of the club med countries, who's fiscal position is being closed watched. Any tremors in this area could lead to the much feared sovereign debt crisis and in some scenarios, the break up of the Euro. Counter acting the negative effect of this news was the rally in equi-ties, therefore bringing risk appetite back onto the menu as well a successful a 1.625 billion euro auction of 26-week Greek bonds at 4.65 percent yield and bids equivalent to 3.64 times what was offered. While these figures would normally be considered expensive they are reflect a much firmer tone in the market than 3 months ago when the ECB felt in necessary to create that huge bail out fund.
DATA: Euro-zone CPI; Euro-zone Industrial production
General:
Fed Sees Slower Growth
Federal Reserve officials, who are likely to reveal Wednesday a cut in their assessment of the growth outlook, are divided on how aggressively the central bank should act if the economy slows further. Although the econ-omy is still expected to keep growing, the forecast for the second half are like to have been trimmed. Deflation is the biggest fear, however with interest rates at near zero the Fed appears to be running out of ammo.
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| GBP/USD | 1.5235 |
| GBP/EUR | 1.1978 |
| EUR/USD | 1.2724 |
| GBP/JPY | 135.55 |
| GBP/AUD | 1.7231 |
| GBP/NZD | 2.1165 |
| GBP/ZAR | 11.471 |
| GBP/CHF | 1.6134 |
| GBP/CAD | 1.5692 |
| GBP/SGD | 2.0952 |
| GBP/THB | 49.23 |
| GBP/HKD |
11.847 red-down; blue-up (snap shot) |
For more information or to get the latest spot rates contact:
John Paul Georgiou
Senior Foreign Exchange Broker
\n john.georgiou@voltrexfx.com