US Dollar:
All eyes were on the bank stress tests carried out in Europe late Friday with the results coming in around Euro-pean closing. US markets pointed the way however as traders warmed to the fact that only seven out of 91 banks failed the tests. This saw risk appetite creep back into the market and a steady flow of funds coming out of the dollar and into the pound and euro saw the greenback give up recent gains. Corporate earnings reports on Friday also buoyed investors to come out of the so called safe haven currencies including the dollar and yen. Four components of the Dow Jones Industrial Average and 135 other companies in the Standard + Poor's 500 index are scheduled to report quarterly results this week. Economists expect a government report this week to show new-home sales increased 13% in June.
Data 13.30: Chicago Fed National Activity Index. 15.00: New Home Sales expected 320k from 300k.
Pound:
Sterling is higher Monday against both the dollar and euro on lessoned risk worries after the European bank stress tests. From here the pound is likely to consolidate in ranges. The handful of banks that failed were smaller banks of low consequence, but still enough to show this was a serious exercise. The pound rallied an impressive two and a half cents since Friday morning against the dollar as traders sold the dollar in favour of the UK currency on gains in risk appetite. The pound also made inroads against its European counterpart as one and a half cents was seen in favour of sterling, pushing GBP/EUR over the 1.20 mark. All four UK banks which were tested on Friday passed. Not all good news for sterling however as confidence in the UK housing market fell with prices. Anxiety about the health of Britain's housing market was rocked again as Hometrack said that house prices fell by 0.1% in July, the first time it has registered a reduction for 15 months, while Rightmove saw a sharp fall in the number of people now expecting the property market to be higher in 12 months time than to¬day. It will be back to fundamentals for the currency market on Monday. We are walking into a week with a large number of potentially dollar-negative event risks, and because of that, sterling may extend its gains.
No major data.
Euro:
Five Spanish banks, one German bank and one Greek bank were the only institutions to fail the stress tests. Their combined shortfall would be about €3.5bn, a number that struck many analysts as too low. The stress test results were neither the buzz kill nor euphoric event that was needed to break the EUR/USD out of its current range. Having said that, EUR/SUD did rise after strong EU data and weak US data at the end of last week, but this may change this week as data focus shifts to the US GDP data report on Friday. The euro did slip against a resurgent pound as both currencies benefitted from a gain in risk appetite but the pound took more of the ap¬plause. This saw EUR/GBP fall to its lowest level in 8 days to hit 0.8318.
No major data.
General:
• Oil prices are a bit higher Monday as investors react to the European bank stress test and as a result of a US storm threat ease to trade at $79.11 a barrel.
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| GBP/USD | 1.5452 |
| GBP/EUR | 1.1973 |
| EUR/USD | 1.2931 |
| GBP/JPY | 135.22 |
| GBP/AUD | 1.7282 |
| GBP/NZD | 2.1241 |
| GBP/ZAR | 11.4584 |
| GBP/CHF | 1.6307 |
| GBP/CAD | 1.6041 |
| GBP/SGD | 2.1133 |
| GBP/THB | 49.40 |
| GBP/HKD | 12.0336 red-down; blue-up (snap shot) |
These rates are for indication purposes
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