US Dollar:
There is little doubt that risk aversion was in full swing through Thursday’s session. Looking to the classical asset classes, the Dow Jones Industrial Average would edge up from its intraday low but it nonethe-less closed out its worst daily performance since March 5th of last year. Looking for confirmation, oil would close at a seven-month low on an extraordinarily volatility session while the benchmark 10-year Treasury note futures contract rallied to its highest close in just over a year. Under these remarkable conditions, recent risk correla¬tions would suggest that the US dollar should have advanced to a fresh 14-month high. Instead, the Dollar Index would retreat for the second consecutive day. Why the change in character and during such a critical point in the shift of underlying sentiment? The first observation to make is that the Index is heavily influenced by the price action of the market’s most liquid currency pair: EURUSD.
DATA : No major data to be released today.
Pound:
The British economy is very dovish and the new government promised to cut spending which led to the Bank of England hinting that it might renew quantitative easing to help the economy. Quantitative easing is code for printing money an action that will put more pressure on the pound, now trading for several days below the $1.50 as there is a growing belief that Britain will allow the pound to slide to boost competitiveness and help pull the countries economy out of recession. However it’s a recession that will onlyt grow worse as the government cuts backs on burrowing and spending.
DATA : Public sector net burrowing.
Euro:
While Greece’s struggle to avoid default or an ejection from the European Union continues to crowd out the financial headlines, the threat that the region’s troubles are on the verge of turning into a global crisis have actually receded over the past week. Have the loud calls for regulation from Germany had a profound impact on speculation? Have the masses revaluated the influence the massive rescue package that the EU drafted last week? Not likely. The market itself is likely weighing in on the fundamental fair value of the euro after it has tum¬bled so far over the span of six months. In reality, the rescue plan merely buys time that officials hope will revive investor confidence and credit markets and the outlook for some EU members is as dire as it has ever been. In Greece, the fourth strike this year took place as citizens marched on parliament to protest austerity cuts that threatened pension and other social programs. For Spain, a 10 year paper debt sale raised just a little more demand than was expected 3.52 billion euros but the deal was made at a highest cost since April of 2009. Clearly doubt is still present. As for Germany, the naked short ban on government debt and its credit default swaps is being labelled a move of desperation. In the meantime, tomorrow there may be a chance for short-term volatility. The final reading of German 1Q GDP is expected and component revisions are likely. For a more timely read on growth, the PMI service and manufacturing numbers are always speculator-ready.
DATA : German IFO business climate.
General:
The AUD/USD and AUD/JPY opened on their lows and fell heavily in early trade as a US investment bank sold. The RBA then rang around dealing rooms and this caused a scurry of short covering and the same US bank was then a notable buyer. The AUD continued to rise throughout the day despite the Australian share market being 3% lower at one stage and when the stocks started to recover, the AUD rally gained steam.
For more information or to request a call back click here
| GBP/USD | 1.4377 |
| GBP/EUR | 1.1513 |
| EUR/USD | 1.2483 |
| GBP/JPY | 129.12 |
| GBP/AUD | 1.7472 |
| GBP/NZD | 2.1447 |
| GBP/ZAR | 11.4573 |
| GBP/CHF | 1.6546 |
| GBP/CAD | 1.5364 |
| GBP/SGD | 2.0281 |
| GBP/THB | 46.34 |
| GBP/HKD | 11.2282 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
\n john.georgiou@voltrexfx.com