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Sterling recovers against majors as risk appetite returns

US Dollar:

The dollar was sold off against the pound and euro yesterday which has continued into Thursday morning trade. Asian markets followed the late rally on Wall Street higher contributed to a lower greenback. The yen fell along¬side its US cousin, which saw a small recovery for the dollar against the yen. Investors are bracing for US initial jobless claims, due at 13.30, and the second estimate of US second quarter GDP scheduled for release on Fri¬day. Market participants will also pay close attention to any comments regarding further stimulus or quantitative easing during Federal Reserve Chairman Ben Bernanke’s speech on the economic outlook at a conference in Jackson Hole, Wyoming, Friday. Given the run of very weak data, investors are now focused on the policy re¬sponse, making an annual meeting of the worlds top central bankers in Jackson Hole, the most important event of the week.  Data 13.30: Unemployment Claims 488k from 500k.

Pound:

Despite the weak US economic data, which normally see’s the low yielding currencies rally on sterling, we saw a reverse play as Wall Street put in a late rally, which continued into Asian, helping the pound make back recent losses against the greenback. A shift in risk sentiment toward the positive side early Thursday has helped sup¬port sterling against the buck and euro, which has now seen cable gain one and a half cents, pushing GBP/USD over the $1.5550 level, and a half a cent put on the euro to push GBP/EUR over the 1.22 level. We also saw the pound trade higher against the rampant yen, showing risk appetite came back with a vengeance, as the yen is traditionally the currency most safe money heads back into. This shows how vulnerable the pound is, with a fall in risk appetite likely to see sterling weaken. It is worthwhile keeping an eye on US economic data out this lunchtime, and Friday which could reverse the pounds recent gains.
Data 11.00: CBI Realized Sales 23 from 33

Euro:

The euro followed the pound as both currencies made gains against the dollar as risk appetite returned to push the single currency higher against the greenback. A fall in th value of the yen also helped the euro push higher, as Japanese players sold the yen and bought the single currency.  The trouble for the euro at present, is that US economic data, and the state of the US economy continues to outweigh any good news from Germany, or elsewhere in Europe. This has seen the euro continue to struggle against the pound, with range trading around the 0.8333 level (1.20) continuing. The return of the worlds eyes back on certain southern European states debt levels has also not been good recently for the euros value. Even though Ireland has been praised of late about tackling its long term debt levels, the fact that the state of the US’s economy is faltering, has seen analysts re-focus back on Ireland, on the back of a recent downgrade of Ireland’s credit rating by Standard + Poor’s. Data 09.00: M3 Money Supply y/y 0.4% from 0.2% & Private Loans y/y 0.4% from 0.3%.

General:
• The market is testing whether the Swiss National Bank will come into the markets, to counter the Swiss francs appreciation. So far, there has been no real indication that they are going to intervene, which al-lowed investors to file into the perceived safety of the franc.
• Oil is higher as a weaker dollar helped prices shrug off a massive increase in US crude reserves. New York’s main contract climbed 27 cents to $72.79 per barrel.

 

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