US Dollar:
The greenback saw a claw back against the yen yesterday as the Japanese currency weakened following a gain in risk appetite. But this move did see the dollar give up recent gains made against both the pound and euro. Asian stock markets are tipping higher Wednesday, as investors put aside economic worries to pick up some bargains on the first day of trading in September, following recent losses. Solid economic data from China and Australia helping investors overcome some early jitters over the health of the global economic recovery. Minutes from the US Fed’s rate setting committee offered no surprise to currency markets, which re¬mained steady after the minutes Tuesday’s afternoon release. But the report put a spotlight on a slowing US economy and discussion among Fed officials on how to kick-start growth. The Fed Minutes reiterated the Fed’s decision to postpone a shrinking of its massive balance sheet, in effect delaying a tightening of monetary policy. Despite a better than expected reading for US consumer confidence released Tuesday, investors are still wor¬ried about the pace of the global recovery, which could lead back to dollar strength against the pound and euro.
Data 13.15: ADP Non-Farm Employment Change 20k from 42k. 15.00: ISM Manufacturing PMI 53.2 from 55.5. Speakers 15.45: FOMC Member Duke.
Pound:
Sterling saw a recovery against the dollar overnight as risk appetite re-appeared in global markets, led by a recovery in equities and a sell off for the safe haven yen and greenback. The pound managed to stem the sell off seen Tuesday, both against the dollar and euro, with cable giving up a couple of cents on the first trading day of September to fall to $1.5324, recovering back to the $1.54 levels this morning. The pounds fall against the euro bottomed out at 1.2063, recovering slightly back to the 1.21 levels this morning. The pound/dollar is likely to consolidate with a bearish bias after falling yesterday on strong European month end demand for the euro-pound cross, which could continue to gain. In the UK, analysts are bracing investors for a slowdown in economic data. The UK manufacturing PMI has edged down only slightly after peaking in May, but details of the recent surveys suggest that a larger decline is in store for the coming months. Economists at Investec said that while they remain positive on prospects for the manufacturing sector, they believe it is beginning to move through its “sweet spot” and is heading toward a more modest pace of growth in the near future—something which could weigh heavily on the value of the UK’s currency.
Data 09.30: Manufacturing PMI 57.1 from 57.3
Euro:
The euro impressed against sterling yesterday as players moved out of so called Risk averse currencies and back into more riskier assets, seeing euro purchasing increase. This saw the single currency rally against both the pound and dollar as players came off the side lines and push equities higher. The euro has continued its rally against the greenback this morning, but EUR/GBP has faltered somewhat with the currency pair trading around the 0.8260 level. Inflation in the eurozone remains subdued, and with the US at risk of a slide back into recession, economic activity in the region could slow in coming months. “With worries over the US continuing to persists, there is a growing expectation that the Fed will possibly delay its exit strategy. Data already out: E/ Zone PMI 55.1
General:
• The yen is falling against major currencies on Wednesday, due to rises in Asian stock markets and speculation that developments within Japans ruling DPJ party could lead to a bigger fiscal deficit.
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| GBP/USD | 1.5401 |
| GBP/EUR | 1.2186 |
| EUR/USD | 1.2728 |
| GBP/JPY | 129.85 |
| GBP/AUD | 1.7115 |
| GBP/NZD | 2.1916 |
| GBP/ZAR | 11.3644 |
| GBP/CHF | 1.5632 |
| GBP/CAD | 1.6362 |
| GBP/SGD | 2.0814 |
| GBP/THB | 48.01 |
| GBP/HKD | 11.9771 red-down; blue-up (snap shot) |
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