US Dollar: The dollar is higher against the pound, euro and yen this morning as risk aversion takes a firm grip on the markets. Sentiment is cautious towards the eurozone fiscal system after Spain rescued a savings bank over the weekend and four more Spanish banks agree to merge. Market participants are focused now on whether Europe's recent credit uncertainty may eventually weigh on economies of other major industrial coun-tries, such as the US, given the fragile global stock markets. Players sold what are perceived as riskier assets and ploughed their funds back into the safe haven of the greenback. Tensions rose in Asian as South Korean shares tumbled amid political tensions on the Korean peninsula and exporters in Tokyo, which meant only one thing in the currency markets—more strength for the dollar. The buck took one and a half cents off the under-fire euro to trade at $1.2280 and also a similar amount off sterling as cable fell to $1.4330 in the dollars favour. The strong move in the dollar meant that many central banks have been forced to buy dollar assets. Data 15.00: Existing Home Sales expected 5.62m from 5.35m.
Pound: Sterling was mixed yesterday as it saw decent gains on the euro but gave up some of last weeks gains on a rallying dollar. The pound is likely to trade lower but in ranges. It is undermined by capital flight to the safe haven US currency on heightened risk aversion. But GBP sentiment is soothed after the new UK Chancellor George Osborne unveiled £6.25bn of spending cuts to reduce the UK’s £156bn budget deficit. The UK Chancel¬lor’s plan seems to be supporting sentiment. Although the total saving announced yesterday is modest (0.4% of GDP) it is definitely a step in the right direction, mostly aimed at reassuring markets that the new government is pledged to toughen the fiscal consolidation effort. Cable fell over a cent and a half from over $1.45 to $1.4330 on the flight to safety issue covered earlier. Against the euro we are seeing a role reversal as the markets are focused on selling the battered single currency, for now! As there seems to be a view that global eyes could re-focus their attention to the UK, should the new government not portray we are not addressing our mounting debt levels. Looking ahead to today, revised first quarter GDP data and mortgage lending figures are both out at 09.30, and the Queen’s speech will also take place. Data 09.30: revised Q4 GDP & Mortgage Approvals.
Euro: The euro slid 1.5% yesterday as the collapse of a Spanish bank and a stark warning from the IMF stoked fresh jitters about Spain and the wider eurozone. As covered in yesterdays report, the Bank of Spain was forced to rescue Cajasur, which has 486 branches and €1.5bn of problem loans. Four Spanish savings banks also agreed to merge in the wake of the crises. The euro fell to as low as $1.2376, although this was well shy of last weeks $1.2143. The global fears surrounding the eurozone have also sent he single currency falling against sterling as we saw over a percent given up to push EUR/GBP to 0.8560. Data 10.00: Industrial New Orders.
General:
• Asian shares dipped sharply this morning as euro-related nerves gripped dealing rooms across the region and prompted big institutional investors to “yank risk off the table”. The Japanese market set the mood for the heavy morn¬ing sell-off, with the Nikkei 225 plunging 2.37% in the morning session. The Japanese currency rose against the euro in what foreign exchange dealers said was a broad exodus into the supposed safe haven of the yen. The resulting yen strength is expected to hit Japans major exporters, which duly saw their shares nosedive. In Korea, the seething animosity between Seoul and Pyongyang and the resumption of cold war style posturing took its toll on sentiment. Morning newspapers were covered in images of South Korean soldiers dusting off the massive loudspeakers used by Seoul to blast propaganda across the border and into the ears of North Koreans. The machines have not been used for 6 years, and some believe that their resurrection signals a renewed threat of conflict on the peninsula. .
For more information or to request a call back click here
| GBP/USD | 1.4295 |
| GBP/EUR | 1.1681 |
| EUR/USD | 1.2241 |
| GBP/JPY | 189.27 |
| GBP/AUD | 1.7628 |
| GBP/NZD | 2.1636 |
| GBP/ZAR | 11.4544 |
| GBP/CHF | 1.6622 |
| GBP/CAD | 1.5377 |
| GBP/SGD | 2.0285 |
| GBP/THB | 46.32 |
| GBP/HKD | 11.1510 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