The Pound has resembled the English football team: relatively safe, unambitious and static.
• Soros: Summit could make or break Euro – markets have seen and heard it all before.
• Spain officially request economic help – investors wary of further assistance.
• US Home Sales and Dallas Fed excite – muted market effect.
• Quiet economic docket for the risk-correlated currencies – AUD and NZD lost for direction.
• England not in the Euro – good news for Sterling.
Over the last few days the Pound has resembled the English football team: relatively safe, unambitious and static. There is movement to a certain degree all around Sterling but the Pound remains resolutely stable, only fluctuating within a rigid structure in a clearly defined area (4-4-2) despite the lingering fear of mismanagement from above (QE). The good news for the British economy is that any penalty losses will affect the Eurozone to a far greater degree than they will the UK. In this sense (the Bank of) England can be proud not to be part of the Euro(s).
With no economic data released yesterday attention turned to the umpteenth EU crisis summit being held in Brussels at the end of the week. The man who broke the Bank of England, also known as George Soros, has criticised Germany for what he calls their “can’t do attitude”. The billionaire business magnate published an article in the Financial Times suggesting that the end of the Euro may be nigh if drastic action is not taken in Brussels.
He proposed the creation of a Eurozone fund to buy and hold debt from crisis-hit countries in return for them undertaking economic reforms. The scheme would allow weaker members of the currency union to benefit from cheap financing without breaking European Central Bank rules.
There have been almost as many EU summits over the past year as there have been great ideas to end the Eurozone debt crisis, and there have been even more melodramatic claims of the single currency’s demise – the problem is that none of these things, thus far, have proven to have any substantial effect on the situation and investors are worried resigned to the fact that these new sprouts of hope may well prove fruitless. So long as Angela Merkel and her cabinet stand firmly against any kind of debt mutualisation then markets will view these crisis meetings with a discerning eye.
In a piece of news that will come as a great shock to absolutely nobody, the Spanish economy minister Luis De Guindos has officially asked the European Union for financial assistance. Mariano Rajoy and the Spanish government are hopeful that the cash sum in the region of €100 billion will be sent straight to the banking sector as to not count as additional sovereign debt. Regardless of how they dress it up, the aid deal will be seen as a bailout package and investors will be wary that this bailout may well lead to another, which could prove damaging to the Euro.
US New Homes Sales jumped to the highest level in over 2 years in May, climbing 7.6% to an annual pace of 369,000. The figure which grew by 7.0% more-than-anticipated was accompanied by a 5.8 point improvement in the Dallas Fed Manufacturing Business Index for June. However the positive ecostats were of little importance and had a minimal effect on the Pound to US Dollar exchange rate.
As is so often the case, the US Dollar is benefitting from its position as the premier safe-haven currency and is absorbing defensive inflows from all around the globe. Crassly speaking, if you could leave your family jewels with either Bruce Willis or Rowan Atkinson, you’d go with Brucey Boy every time wouldn’t you?
Having said that, the Pound has grown by over half a cent this morning against the US Dollar as investors anticipate a positive outcome from the UK Inflation Hearing and BoE Governor Mervyn King’s speech.
The Canadian Dollar was given a small boost by the unexpectedly strong US construction data which suggested that demand is improving for Canadian construction materials. As with all of yesterday’s releases, the figure was almost impotent in terms of market-moving effect.
The Aussie Dollar is at risk from a quiet economic schedule; with no significant data of its own, the Aussie finds itself a slave to the fickle nature of risk appetite. Considering that the US Fed looks unlikely to implement another round of easing unless their hand is suitably forced, it is quite possible that the Aussie Dollar could find itself subject to mild depreciations.
New Zealand Dollar
Later on tonight the New Zealand Trade Balance is expected to show a surplus of NZD$300 million, which is slightly less than last month but is unlikely to hold any real sway in terms of Kiwi Dollar direction. Like the Aussie the New Zealand Dollar will largely be dictated by global risk sentiment, which is likely to prove bearish for the antipodean currencies.
Data Released Today
06:00 EUR German GFK Confidence Survey (July)
08:30 UK Public Sector Net Borrowing (May)
14:00 US Consumer Confidence (June)
22:45 NZD New Zealand Dollar Trade Balance (May)
- Pound to Euro, US Dollar exchange rate: Sterling was boosted by the news that UK Retail Sales rebounded from April’s poor figure of -2.4%
- Pound Sterling, the Euro and US Dollar exchange rate – The Pound staged a recovery from the 15 month low against the euro
- Pound to Euro Exchange Rate Forecast: The path of the Pound to Euro exchange rate has resembled that of a yoyo
- Pound Sterling, the Euro and US Dollar exchange rate news – The Pound declined against the U.S Dollar for a second day
- Foreign Currency Exchange Rate Forecast – Global Stock markets Plunge, Will the Euro Survive?