US Dollar:
After the mixed picture of economic recovery or double dip fears, investors seem happy to lighten equity posi-tions and wait things out in safer asset classes where capital preservation is more assured. This has led to the usual run for cover to safe haven currencies, predominantly the yen and dollar. This has seen the dollar take a couple of cents off both the pound and euro as investors scramble for cover to the safe haven greenback. US retail sales are going to be closely watched to see if they can counter the pessimism that has hit sentiment in the last couple of days, due at 13.30 today. US weekly jobless claims reported yesterday unexpectedly climbed to their highest level in six months, contributing further to the sombre tone in the markets. We are now in a pe¬riod of consolidation after the fears raised by the Federal Open Market Committee earlier in the week.
Data 13.30: Core CPI m/m 0.1% from 0.2%, Core Retail Sales m/m 0.3% from –0.1% and Retail sales m/m 0.5% from –0.5%. 14.55: U of Michigan Consumer Sentiment 69.4 from 67.8
Pound:
Sterling is trying for a rebound against the dollar this morning, although tentatively so, given the con-tinuing doubts about economic endurance. Over the last few days we have seen cable take a pasting with GBP/ USD giving up more than four cents since the start of the week, falling from just under the $1.60 level down to below the $1/56 mark. A scramble for safe haven currencies was the main reason for this move, although the UK inflation report released this week didn’t really help the under pressure pound. In its inflation report released on Wednesday, the Bank of England cut its GDP forecasts and added that it expects inflation to fall below its target level by early 2012. Both the forecasts and the tone of the document has led to a further scaling back of rate hike expectations in the market (normally a negative for that currency), with the balance of risks having shifted to further policy loosening rather than tightening in the shorter term. Sterling has not moved much against its European counterpart, with GBP/EUR trading in tight ranges. Despite better than expected GDP numbers from Germany this morning, the pound is still holding its own against the euro, trading above the 1.21 level.
Data: Not a sausage.
Euro:
On Thursday the euro was hit by negative news flows as it fell against the majors. Against the rallying dollar, we have seen nearly four cents lost as players rushed to the safety of the greenback and sold the single currency. This led to EUR/USD falling from over the $1.32 level to below the $1.28 mark. Against the pound, EUR/GBP has been range bound as both currencies cancel each others positive/negative punches out. This morning we have seen some kind of recovery for the single currency, helped by better than expected GDP num¬bers out of Germany. The German economy grew by 2.2% in the three months to the end of June, its fastest quarterly growth in 20 years. Such quarter on quarter growth has never been recorded before in reunified Ger¬many. The main reason for the higher than expected growth was strong exports, helped by a weaker euro.
Data 10.00: E/Zone Flash GDP q/q 0.7% from 0.2% & Trade Balance –2.3B from –3.0B.
General:
• Japanese officials yesterday publicly aired their concerns about yen strength. Still, some said the yen could resume its climb. Taken together, Japans official claims that it will take appropriate action and the fact they have done nothing underscores that the bar to intervention is high. If Japan were to intervene, it would, no doubt, prefer a multilateral exercise, as that would increase the chances of success., How-ever , at present Japan looks out on a limb by itself.
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| GBP/USD | 1.5674 |
| GBP/EUR | 1.2158 |
| EUR/USD | 1.2878 |
| GBP/JPY | 134.64 |
| GBP/AUD | 1.7362 |
| GBP/NZD | 2.1909 |
| GBP/ZAR | 11.3364 |
| GBP/CHF | 1.6438 |
| GBP/CAD | 1.6239 |
| GBP/SGD | 2.1279 |
| GBP/THB | 49.95 |
| GBP/HKD | 12.1711 red-down; blue-up (snap shot) |
For more information or to get the latest spot rates contact:
John Paul Georgiou
Senior Foreign Exchange Broker
\n john.georgiou@voltrexfx.com