Daily Insight

Following a quiet day in terms of economic data released, there was some renewed appetite for the Dollar in early trading yesterday as investor's looked for a relative safe haven amid continued turmoil in the Middle East and speculation increased that the Federal Reserve would lift interest rates one last time in August before pausing at 5.50%. However, some speculators have argued that yesterday's move can be attributed to a 'correction from last week's sell off rather than be driven by any new fundamental developments'. There is some significant data released in the States today that could potentially shift rate expectations with U.S Consumer Confidence set to decline from 105.7 to 104 in July as a dramatic increase in petrol prices continues to weigh on consumer sentiment and household spending. In addition, the U.S housing market in particular has been in retreat due to the aggressive tightening of interest rates over the last two years and the Sales of Existing Homes is widely expected to drop in June following an unexpected rise in May.

The recent positive sentiment surrounding the Pound was prematurely cut short yesterday amid a disappointing retail report with the CBI Distributive Trades Index unexpectedly dropping to 7 from a reading of 9 in July as the increase in sales at the start of the Summer moderated after the conclusion of the World Cup. In addition, the Pound was hampered further from comments from the Deputy Prime-minister, John Prescott, who hinted at a possible timetable for Tony Blair's resignation while elsewhere, the seasonally adjusted three-month report for UK car production dropped by much more than expected, falling from 1.6% to 0.4% in June.

The Euro has been suffering in recent weeks and that trend seemed to continue yesterday dropping by 0.6% against the Dollar to close just above 1.2600. However, against Sterling the resistance level at 1.4675 has held firm in the last 24hrs and the trend looks to be peaking around this level. Therefore, Euro buyers may wish to place a stop order in the market to ensure against adverse market movement in order to take advantage of the current rate of exchange as we draw ever closer to the ECB announcement next week. In terms of economic data released, the focus today will fall upon the Business Confidence reports in France and Italy while elsewhere, the Current Account Balance is widely expected to show a marginal deficit in May from the previous month.

Data Released 25th July

EU 09:00 Current Account (May)

U.S 15:00 Consumer Confidence (July)
U.S 15:00 Existing Home Sales (June)

written by Adam Solomon