by Adam Solomon
Sterling / Euro and US Dollar
After reaching a 6-week low against the Euro during trading yesterday, Sterling has recovered slightly this morning, edging back above support at 1.2000 after news released overnight confirmed that U.K retail sales accelerated last month.
Sterling came under further pressure against the Euro during trading yesterday over reports of heavy selling by a U.K clearing bank and speculation over the strength of the economic recovery in the U.K.
Data released from the Euro-Zone yesterday, confirmed that due to weaker current conditions, investor morale has dipped, underpinning the sharp rise that was seen last month.
The outcome of this report followed remarks from the Governor of the European Central Bank, Jean Claude Trichet in a media interview he conducted during the weekend. Trichet mentioned that he didn’t expect a double dip recession to occur in the Euro-Zone.
Trichet suggested that individual country performance is expected to be mixed, with Germany (Europe’s largest economy) expected to continue to outpace other economies. Trichet was glowing in his praise of the German economy, and stated that its economic model can be a model for its European neighbours. Trichet confirmed that the strong performance of Germany’s economy is a reward for its efforts, with its success due to the moderation of unit costs, a slower rise in salaries than elsewhere, and progress made on productivity.
Markets were closed for Labour day in the U.S yesterday, however an overnight spike in risk aversion helped keep the rate underneath the $1.5400 level against the U.S Dollar.
It will be a relatively quiet week in terms of U.S data, with focus falling on weekly jobless claims data, and tomorrow’s release of the Fed’s beige book. Consumer credit and international trade figures for July will also be of interest.
In the U.K, the Bank of England is due to hold it’s monthly policy meeting on Thursday. Interest rates are expected to remain on hold, however after last weeks disappointing PMI results, there has been increasing speculation over whether policy makers will consider extending emergency stimulus measures.
It is a busy week on the U.K data front, markets will be watching the results of Industrial production and trade reports for the month of July, as well as the PPI report for last month. NIESR GDP data due to be released tomorrow morning is anticipated to point to a sharp slowing in the rate of recovery during the second half of the year.
In the Euro-Zone, markets will be closely scrutinising comments from ECB council members who are scheduled to speak over the course of the week. National Industrial production reports for the month of July are set to dominate. Markets will also be watching the outcome of the CPI report for Ireland and final Q2 GDP data for Italy.
Euro / US Dollar
After starting the week pushing towards the $1.30 level, the Euro fell sharply against the Dollar overnight after a report released in the Wall Street Journal questioned the viability of European Banks. This report caused concerns to resurface and pushed investors to sell the single currency.
In the absence of any significant data from the Euro-Zone and U.S today the Euro is likely to remain vulnerable.
GBP / AUD
The Australian Central bank opted to keep interest rates on hold at 4.5% as widely anticipated. The accompanying policy statement from the Reserve Bank of Australia also weighed on risk appetite, with the Bank highlighting the strength of the domestic economy but the “somewhat uncertain” outlook for the global economy.
The Bank of Japan opted to keep interest rates on hold overnight but said it will take action when necessary. The Yen showed little reaction.
Related posts:
- Foreign Exchange Daily Insight – Sterling remains under pressure in the lead up to the emergency budget
- FX126 Foreign Exchange Daily Insight – Sterling remains under pressure against the dollar
- Sterling slightly better, but for how long?
- The Euro is slightly firmer against sterling…
- Foreign Exchange Daily Insight – The Euro is under pressure again against the dollar, sterling and the Yen
