Analysis

15th July 2010

 

 

Sterling / Euro

 

Sterling turned higher against the euro again yesterday, climbing half a cent following some positive employment figures.

• Data showed the number of people claiming unemployment benefit in Britain fell to its lowest level in over a year in June, while the number in work jumped at its fastest in four years.
• Jobless benefit claims in June fell by 20,800, exceeding market forecasts for a more modest fall and renewing hopes that the economic recovery is still on track.
• Whilst the labour market numbers were encouraging, these figures represent pre-spending cut data and the real test will be to see how the labour market holds up over the coming months.
• In trading this morning movement is relatively subdued with sterling again trying to consolidate its position above €1.20.
• Through the remainder of the week there is little data out from either the eurozone or UK. Direction is likely to come from broader market movements though we expect the price to remain in a relatively tight range.

 

 

Sterling / US Dollar

 

The pound gained another cent against the US dollar yesterday, hitting a fresh ten week high as strong employment data lifted demand.

• Positive labour market figures were suggestive that the economy continues to emerge from recession and boosted hopes for a sustainable recovery.
• Data revealed that the number of jobless benefit claimants dropped significantly in June whilst the overall rate of unemployment fell back to 7.8%.
• The dollar also came under pressure as speculation builds that corporations will announce stronger second-quarter profits than expected following Intel's lead and buoying demand for riskier assets.
• In trading this morning sterling is again edging higher but the pace of its climb has slowed following the minutes to the Fed's Jun 22-23 meeting that showed a marginal downgrade to economic projections.
• $1.53 is also a stiff resistance level for the pound and it will need fresh impetus to take the price higher. With US figures still disappointing expectations, sterling could struggle in the short term.

 

 

Euro / US Dollar

 

The euro rose to a two-month high against the dollar yesterday as US stocks erased losses following positive corporate earnings, reducing demand for the greenback as a refuge.

• The single currency's downturn earlier this week looks short lived with the price bouncing back as corporate announce better-than-expected profits for the second quarter.
• The dollar also came under pressure as US retail sales fell last month, continuing the run of disappointing data. The Commerce Department reported that sales decreased by 0.5% in June after falling a revised 1.1% in the previous month.
• In trading this morning, the markets are searching for direction as investors await another busy US calendar this afternoon.
• The data is likely to be an important market moving factor, especially after the minutes from the Federal Reserve's last meeting fanned speculation of further policy easing.
• At present the price is virtually unchanged from the closing price, hovering around 1.2750 and searching for another boost higher.

 

 

Rest of the World

 

Australian Dollar

 

The pound continued to gain against the aussie yesterday, albeit steadily, with investors unwilling to take up risky positions ahead of key figures.

• In trading this morning, the price has spiked higher with the aussie dollar under pressure after China announced weaker economic growth than had been expected for the second quarter.
• Growth slowed to 10.3% from 11.9% in the three months through to June, reducing demand for commodity-linked currencies.
• The data was not a huge disappointment though, particularly considering the high base of comparison a year earlier, and the aussie has stemmed its slide.
• Sterling is currently a cent and a half higher with the price at 1.74 and amid another day packed with figures from the US and corporate earnings data, we expect sterling could hold the advantage as investors caution against risky assets.

 

 

New Zealand Dollar

 

A positive day on the global equity markets supported the kiwi yesterday, but disappointing data from New Zealand has lead to a slight selloff this morning.

• Whilst sterling received a broad boost from some employment data, demand for the kiwi amid a risk off climate remained solid as markets speculate about an interest rate rise in New Zealand later this month.
• In line with other commodity-linked currencies though, the kiwi dollar has come under pressure this morning following some figures from China.
• While Chinese growth is slowing, it is slowing from a comparatively strong position and the data has really just exacerbated an already cautious mood created by data from the US.
• At present sterling is trading just above 2.12.

 

 

 

 

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