GBPEUR/GBPUSD

After falling through key support of $1.6400 towards the end of trading last week, Sterling has deteriorated even further this morning, challenging key support levels at 1.6000 against the USD and 1.1575 against the Euro.

Weaker than expected non-farm payroll data for the month of June released last week has 'soured' market optimism with regards to the prospects for a global economy recovery.

Traders will be looking to this week’s round of economic data for any fresh evidence that activity is bottoming out. After last weeks jam packed calendar, It is a relatively light week ahead in terms of economic data for all zones.

Non-manufacturing ISM due to be released from the U.S at 15:00 this afternoon will be key to setting the tone for the week ahead and any signs of a rise in the index could provide a lift for risk sensitive currencies like the Euro - which has started the week trading within a narrow range against the dollar as the market seeks fresh direction.

Markets will also be watching with interest, the outcome of U.S consumer credit and trade balance figures due to released this week.

U.S. stock-index futures dropped, indicating the Standard & Poor’s 500 Index will extend three weeks of declines, as concern the economic recovery will stall sent oil and financial shares lower.
S&P 500 futures expiring in September dropped 1% to 884.80 as of 9:55 a.m. in London. Dow Jones Industrial Average futures lost 1% to 8,161 and Nasdaq 100 Index futures fell 0.8 % to 1,433.5. U.S. markets were closed on 3rd July to commemorate Independence Day.

U.S. Vice President , Joe Biden confirmed in a statement with ABC News yesterday afternoon that the Obama administration “misread the economy” with previous forecasts that if congress e n acted a $787 billion fiscal stimulus plan u nemployment would peak at 8%.

In terms of the eurozone, national Industrial Production Data is due to dominate the week ahead . Key for markets will be whether or not the manufacturing sector shows signs of stabilising after the recent sharp fall in output.

In the U.K, the Bank of England are due to release their latest interest decision on Thursday afternoon at midday. They are widely expected to keep interest rates on hold at 0.50%. Markets will be watching closely for any indication on whether the Monetary Policy Committee (MPC) are likely to consider extending their quantitative easing strategy.

Caution is also likely to reign ahead of this week’s G8 meeting , with markets paying close attention to any comments amid recent rumors that China has recently floated the issue of an alternative to the dollar as a global reserve currency .

Due to the break below key support levels of 1.6400 against the USD and 1.1575 against the Euro, we are advising clients who are interested in purchasing these currencies to remain extremely cautious. Clients may wish to consider placing a protective stop order into the market, which could help protect against the possibility of any further potential downside movements.

EUR/USD

Weaker than anticipated U.S non farm payrolls report for June released last week casted doubts on the outlook for the economy, overshadowing the improving tone of other recent indicators and pushing up risk aversion once again. This of course is bad news for the euro, which is currently trading back below the $1.40 level versus the USD.

The European Central Bank elected to keep interest rates on hold at a record low of 1% last week, and the Chairman Jean-Claude Trichet signaled that the central bank will keep rates unchanged over the coming months. Officials are expected to deploy new tools to fight the worst recession since the Second World War, such as purchasing covered bonds.

Data Released 6th July


EU 09:30 Sentiment Indictor (July )

US 15:00 Services ISM (June) - Business Activity

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