Analysis

19th July 2010

 

 

Sterling / Euro

 

Sterling fell to its lowest level against the single currency in over a month on Friday, closing at 1.1830 as rising European money market rates and higher equities increased demand for the euro.

• Sterling suffered heavy losses against the single currency, with the euro managing to post gains against all of its major peers, including the US dollar.
• Sterling did manage to regain some ground for a short period, touching 1.1954 after data revealed the eurozone's trade balance fell from €1.6billion to -€0.3billion; however, the pound gave back its gains before the close.
• Today sterling is up marginally, trading just below the 1.1870 level.
• We expect to see little activity between this pairing today as there is little economic data out to strengthen or weaken either currency.
• Later this week, however, there is a wide range of data out, including Retail Sales and preliminary GDP results.

 

 

Sterling / US Dollar

 

Sterling fell heavily against the greenback, touching 1.5284 before closing just below the important psychological level of 1.53.

• A re-alignment was expected after sterling's meteoric rise of two cents against the dollar on Thursday, taking it to just below the 1.55 level, its highest for almost 3 months.
• Sterling had made up ground against the dollar on Thursday after a string of bad results from the US; however, some positive inflation figures on Friday saw investors buying back the dollar, all but erasing sterling's gains from Thursday.
• Today sterling is down slightly after the Asian session, currently trading around the 1.5290 level.
• We expect to see the pair trade within a tight range today, with little data out and the market preparing for important data out later in the week, mainly from the UK.
• With sterling managing to stay within touching distance of the 1.53 level, we could see it rally with some positive results later this week.

 

 

Euro / US Dollar

 

The euro rose for the third consecutive week and posted the biggest weekly gain since May 2009.

• The pair reached 1.30 on Friday before closing around 1.2930, with the single currency rising after poor consumer confidence data from the US.
• The euro also gained support from stronger European equity markets and rising European money market rates.
• The US dollar continues to lose ground against the Japanese yen and the Swiss franc, undermining its legitimacy as the world's leading safe-haven investment.
• Today the euro has opened down, falling back below the 1.29 level.
• With the expectation of more positive corporate data and some positive data from the eurozone, we could see an increase in risk sentiment, sending the euro above the 1.30 level.

 

 

Rest of the World

 

Australian Dollar

 

The pound was up over a cent on Friday as risk sentiment continued to fall, and with the Japanese bank holiday today, trading is holding firm.

• The aussie lost ground on Friday as negative equities and commodities led to a fifth straight day of losses. A negative outlook from the US Fed and investors recently had led to a week of risk-averse trading.
• With Japanese markets closed for a bank holiday, and the release of monetary policy minutes from Australia tomorrow, the Australian dollar has been tame this morning holding just below 1.76.
• Tuesday's minutes and a speech by the RBA governor Glenn Stephens afterwards should provide some interesting points on the direction of interest rates and the outlook for the Australian economy as a whole.
• The remainder of the week will be quiet for Australian economic news, so expect risk the pairing to track equity markets.

 

 

New Zealand Dollar

 

Lower than expected inflation numbers on Friday sent the kiwi tumbling at the end of the week, and the currency has continued to drop lower this morning.

• The kiwi dollar lost heavily on Friday as quarterly inflation came in at 0.3% rather than the expected 0.5%, leading investors to price in the belief that rate rises by the RBNZ will be slower than first expected.
• This morning, the kiwi is holding at the mid 2.14 level with light trading due to the Japanese holiday and fears of a slowing economy marked by the poor inflation numbers.
• With no major economic numbers out this week, the kiwi will continue to follow equity market movements.

 

 

 

 

Caxton FX is Authorised and Regulated by The Financial Services Authority to provide investment advice.

This email is prepared by Caxton FX Ltd for information only. It may contain personal views that are not the opinion of the company. This is not an offer to purchase or sell any security. The information contained herein is believed to be reliable but Caxton FX Ltd does not represent that it is accurate or complete. No liability is accepted whatsoever for any loss from its use. Quotations and assumptions are indicative only. Caxton FX Ltd or its affiliates may have a material interest in the subject or a related matter herein. Caxton FX Ltd is authorised and regulated by the Financial Services Authority for investment advice only. Foreign exchange transactions with Caxton FX fall outside the remit of the FSA and are regulated by HM Revenue and Customs. This email does not constitute advice for any foreign exchange transaction, nor is it intended as a solicitation for funds or recommendation to trade. Caxton FX Ltd accepts no responsibility for any loss suffered or damages sustained through any act or omission taken as taken as a result of any of the information herein.