Analysis

30th July 2010

 

 

Sterling / Euro

 

Sterling fell against the euro on Thursday as traders looked to close out short positions for month end.

• Sterling fell to a low of 1.1912 yesterday as traders bought euros to close out their short positions.
• Sterling had progressed from a low of 1.1813 early in the week to hit a high of 1.2002 on Wednesday, only to have most of its gains erased on Thursday to close at 1.1934.
• Thin end of the month trading has seen little movement between the pound and the euro this morning. Sterling has a slight edge as weak German retail sales drag the euro lower.
• This has left sterling up this morning, currently trading at the mid 1.19 level.
• With little market moving data out today, expect investors to close out month end positions and this should be beneficial for sterling.
• Next week will see interest rate decisions by both the Bank of England and the European Central Bank; the expectation is for rates to stay the same. Statements following the decisions will give an insight into economic predictions and potential future rate rises.

 

 

Sterling / US Dollar

 

Sterling rose early in the session, only to have its gains wiped out by the end of play, ending 6 straight days of gains.

• Sterling hit a new 5 month high yesterday at 1.5662; the gains were underpinned by recent UK data surprises and US economic let downs.
• The dollar was also coming under persistent selling pressure after a strong performance in US equity markets in July.
• However, the pound's gains were eradicated later in the session after a series of poor global economic data pushed the market towards the safe-haven currency.
• Sterling is up slightly this morning as the market awaits the advanced GDP figure from the US, due out at 13:30 BST.
• Investors will be looking closely at the GDP data, hoping that this will answer some questions about the recent uncertainty in the US economy.
• Next week traders will be looking towards Friday's all important Non-farm employment change in the US for direction in the American economy.

 

 

Euro / US Dollar

 

The euro hit a 12-week high against a broadly weaker dollar on Thursday as traders look to close out short positions for month end

• The euro surpassed market expectations this month to move above the 1.30 level. The market's expectation of a devaluing euro has left an excess of short positions against the euro.
• A jump in eurozone economic sentiment to a 28-month high and a decline in German unemployment also helped to support the single currency's gains.
• However, the euro has opened down this morning and is currently trading just below the 1.31 level.
• All eyes will be on the advanced GDP figure from the US. A worse than expected result could send investors looking for a safe-haven, leaving the euro tumbling next week from its current artificial high.

 

 

Rest of the World

 

Australian Dollar

 

Sterling lost just over a cent to the aussie yesterday, as housing sales and consumer lending were lower than expected. This morning the pair are holding firm.

• With poor figures out of the UK and a broadly weaker US dollar, investors have been moving funds into other currencies, giving the aussie momentum. Aussie gains were largely based on sterling weakness as it failed to find traction against the yen.
• This morning has seen the pound hold firm with investors awaiting month end. In the afternoon, expect to see a rise in demand for the aussie as investors balance out their portfolios.
• July has been a negative month for the pound against the aussie, as the UK currency has lost 4 cents since the opening on July 1 st.
• With only GDP numbers from the US to look forward to today, investors will be looking towards next week, with Tuesday bringing a raft of data and a rate decision from the RBA.
• The RBA are not expected to raise rates. However, the statement following the decision could provide some insight into the likelihood of further rate rises for the remainder of the year.

 

 

New Zealand Dollar

 

The pound made gains yesterday as investors reacted to dovish comments by the RBNZ, and sterling has continued to extend its gains this morning.

• The kiwi dropped nearly one and a half cents on Thursday as the RBNZ took a downbeat view on interest rate rises and stated that the kiwi was overvalued. Only weak housing numbers from the UK prevented a steeper drop.
• Investors are still selling the kiwi after the comments from the RBNZ. With new trading rules in Japan limiting leverage coming into affect next month, the kiwi has become a target of Japanese traders looking to drop positions to bring their levels below the new standard.
• With little data out for the rest of the day, the kiwi will continue to be undermined by the negative sentiment that has begun to plague it after the RBNZ comments.
• Next week, Wednesday will see employment numbers which should give an indication on the New Zealand economy.

 

 

 

 

 

 

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