Is GDP Optimism Bad for U.S. Dollar?

The U.S. dollar is falling against the euro for the second day today as the traders expect a decline in the contraction of the U.S. GDP for the second quarter of 2009.
The dollar is also falling against the British pound, approaching its monthly low levels, as the GDP optimism is forcing investors to buy high-yielding assets around the world. The gross domestic product advance report for Q2 2009 is expected to show a contraction by 1.5 percent today compared to 5.5 percent drop in the first quarter of the year. If the report is released according to the market’s forecast today, there is a good chance for the U.S. economy to come out of the recession by the end of 2009 or in the first half of 2010.
Forex market analysts recommend to pay attention to the recent important events that spur the attractiveness of the risky and high-yielding currencies: rise of the global stocks, steady price growth in U.K. housing market and a significant slope in the U.S. treasuries. The only problem that’s still able to kill the global optimism for recovery is the increasing unemployment in all the developed countries.
EUR/USD rose from 1.4065 to 1.4108 as of 7:54 GMT today after trading as low as 1.4006 two days ago. GBP/USD went up from 1.6491 to 1.6560, while USD/JPY gain insignificantly — from 95.55 to 95.60.

South African Rand Down on Merging Speculations

The South African currency, which hit an eleven-month high versus the greenback this week, pared its weekly gains as an Indian newspaper affirmed that the merging of Bharti with MTN may take longer than expected, raising concerns about investments in South Africa.
After posting virtually two weeks of consecutive gains versus most of the 16 main traded currencies, on renewed optimism and stocks rally, the South African rand ended the week with a negative performance as the Economic Times stated that MTN Group Ltd., the largest African mobile-telephone operator will take longer to close a deal with Bharti Airtel Ltd., which is interested in a stake of Africa’s mobile network, promising the injection of $7 billion in the South African economy. According to the newspaper, the complexity of the deal may delay the negotiations in additional weeks, raising concerns about the money to be invested in South Africa by the Indian telecom operator.
The influence of the companies’ merge in South Africa is strong, considering the size of the deal, an eventual delay is expected to affected the South African currency, at the same time as a strong rand may decrease attractiveness for Bharti to invest in South Africa, since costs become naturally higher. This Friday’s devaluation was a healthy correction for the rand and for the upcoming mobile-operators’ deal.
USD/ZAR ended the week at 7.7495 from a previous rate of 7.7580.

Swiss Central Bank Attempts to Control Franc Gains

The Swiss central bank widened its foreign currency holdings in order to prevent the national currency to continue its rally, being the current foreign reserves in Switzerland the highest in twelve years.
The Swiss National Bank is struggling to prevent the franc to rally, as the demand for the Swiss currency has been on the rise since the first quarter of the year. The national foreign currency reserves reached 81.7 billion Swiss francs from a previous indication of 55.8 billion francs, being both reserves in euro, mostly, and in dollar, to a lesser extent, the most significant ones increased by the Swiss banking authority. The insistent rally in franc rates is rising concerns in Switzerland, affecting the national exports, as a higher currency lowers Swiss products price competitiveness abroad, and fears of deflation have been increasing, since the franc rates continue significantly high.
Analysts affirm that it will be a hard task to control the Swiss franc rates, as the demand for the currency remains strong, but since the SNB started a foreign currency purchasing currency, if the franc didn’t weaken, at least its rally was contained versus a number of important currencies. As long as the government intervenes on the Swiss franc, we are likely to see it neutral or losing ground against currencies like the euro and the Australian dollar.
EUR/CHF traded near neutrality today with 1.5186 as of 12:51 GMT from 1.5195 yesterday. USD/CHF also remained stable.

Pound Slides Versus Majors on Public Deficit

The pound dropped today versus the euro and the dollar, before a report, that even if did not come with extremely pessimist numbers, indicated a considerably high public deficit in the country, suggesting that the government may struggle to stabilize the nation’s finances.
The pound slid versus several currencies after posting multiple days of positive performance mainly against the greenback, but also versus the yen and, to a lower extent, to the euro. Even if the budget deficit published today was lower than expectations, at 13 billion pounds versus 15.7 billion forecast, the number is still very high, and almost doubles the figures for the same month last year, indicating that the British public finances are deteriorating. British finances have been facing a complicated scenario both in the public and financial sector since the credit crunch almost a year ago, and further reports like this are likely to weigh negatively on the pound outlook.
Analysts stress on the fact that public finances are in a long term negative situation, and further readings are likely to indicate pessimistic numbers, even if the current budget deficit is better than the previous one, the numbers are very high if compared to the pre-global slump figures. Currency specialists, in their majority, do not expect the pound to climb much further versus the main currencies.
GBP/USD traded at 1.6414 as of 11:43 GMT after reaching 1.6555 yesterday. EUR/GBP climbed to 0.8663 from 0.8595.

Pound Declines as Terrorist Attack Drives Traders to Safety

The pound posted its first day of losses versus the U.S. dollar this week as explosions in Jakarta, the capital of Indonesia, attracted investors to the safety of the greenback, stopping a five-day rally that brought the pound up on renewed economic hopes.
The pound was affected by two facts towards the end of the week as the optimism that made it rally versus the greenback slowly faded, forcing investors back to the safety of the yen and the dollar. Complications regarding the future of CIT Group Inc., were the first factor that moved markets’ trends this week, as an eventual bankruptcy of one of the biggest financial groups in the world would certainly raise concerns on the future of the global economy. Today, an orchestrated attack in Jakarta, exploding simultaneous bombs in two different hotels brought Asian markets down, and once again, increasing appeal for safer positions in the United States.
Currency specialists explain that the pound’s decline occurred due to market sentiment changes, which was previously favoring the pound with optimism, and now is once again risk averse, favoring currencies like the yen and the dollar. U.K.’s fiscal balance deterioration is also warning traders about further problems that may occur in Great Britain’s economy, adding negatively to the pound’s outlook.
GBP/USD traded at 1.6303 as of 10:19 GMT from a previous rate of 1.6450 before Jakarta’s blasts. GBP/JPY fell to 152.81 from 154.45.

Yen Rises After Hotel Blasts in Indonesia

The yen, known for its refuge investment profile, rose for another day versus most of the 16 main traded currencies as explosions in Indonesia brought a certain amount of tension to financial markets in Asia this Friday.
After starting the week posting losses versus a significant number of currencies due to a rise in risk appetite among traders, the yen rebounded since yesterday, when concerns regarding CIT Group Inc., which stated that will not obtain U.S. guarantee for its bonds and may file for bankruptcy, made traders once again tense and opting for yen priced assets to protect their portfolios. Today, two hotels in Jakarta, the capital of Indonesia, were target by explosions, which brought the Indonesian rupiah to the lowest level in two weeks and several Asian stock markets down, once again, leaving the yen as the safest option for traders in the region.
Japanese analysts stress on the fact that the world economy still did not find its way out of the current recession, and even if optimism sometimes rises in markets, the situation is delicate and a terrorist attack like today’s in Jakarta adds pessimism in equities markets, bringing traders back to the yen before the end of the weekly session.
AUD/JPY traded at 74.91 as of 9:43 GMT after hitting 75.80 hours before the blast in Indonesia. CHF/JPY followed, being traded at 86.84 from a previous rate of 87.52.

Pound Climbs on British Jobs Data

The pound climbed sharply against the dollar and the yen as an employment report with optimistic figures may have indicated that the worst of the recession is already behind, spurring demand for the British currency.
The pound, which lost significantly against the dollar and the yen last week, virtually pared its losses as an employment report in Britain brought optimism back among domestic investors. Today Intel Corp. forecast sales beyond analysts’ predictions, adding attractiveness for the pound sterling profile, which may proceed its rally if the current scenario remains unchanged.
GBP/USD traded at 1.6422 as of 20:16 GMT from an intraday price of 1.6275.

Canadian Dollar Hits One-Month High on Crude Oil Advance

The loonie posted the third day of advances against its U.S. counterpart as the crude oil, one of the main country’s exports, advanced today, boosting demand for the Canadian currency.
The Canadian dollar has been one of the best performing currencies this week, as stocks and commodities rebounded thanks to a renewed risk appetite among traders, favoring the high-yielding profile of the loonie. The greenback may continue to loose further versus its Canadian counterpart if the demand for commodities continues on the rise, increasing attractiveness for the commodity-linked Canadian currency.
USD/CAD fell to 1.1125 from a previous rate of 1.1365 in the intraday comparison

South African Rand Climbs as World Cup Strike Ends

The South African rand, which posted several weeks of decline as a new wave of risk aversion spread around equities and currency markets, rose as the world cup stadium construction workers strike ended, raising confidence in the country as stability returned.
The South African rand was one of the most punished currencies by a new wave of risk aversion that struck markets last week, as concerns regarding the global slump rose, making the high-yielding emergent market South African rand to be the worst performing among the 16 most traded currencies. This week, risk appetite has returned to markets, and a world cup constructions workers strike that has been lasting for seven days in South Africa has ended, creating a perfect domestic and international scenario for traders to invest once again in the South African economy and currency, making the rand to climb from a seven-week low against the U.S. dollar.
Today the rand’s outlook will be at hands of a U.S. industrial production report, that will certainly direct the level of risk aversion among traders this week. If the report to be released bring optimistic numbers, it is likely that the rand will proceed to rally against low yielding currencies like the yen, otherwise, the South African currency may return to monthly record lows.
USD/ZAR traded at 8.1575 from a previous rate of 8.3120, being the South African rand one of virtually all high-yielding currencies that won against the greenback today.

Yen Down on U.S. Output Report Speculations

The yen and the greenback proceeded for a third day dropping as a report in the United States today is likely to indicate that the industrial production is shrinking at a slower pace, rising confidence that the global slump is easing, and consequently pushing traders to high-yield.
A very positive day in stock markets this Tuesday has attracted investors to purchase high-yielding assets, damping demand for the safety of the yen. In Asia, emergent-market currencies like the South Korean won and the Indonesian rupiah led the gains as their stock exchanges were the most bullish in the region. The yen lost against 15 of the 16 most traded currencies after Bank of Japan lowered forecasts for the Japanese currency, which lost appeal not only with a less attractive scenario for safer assets, but also with pessimism towards the future of the Japanese economy.
The explanation given by analysts for the current downtrend of the yen points directly to data released in the U.S. regarding earnings, which came out to be higher than expected, bringing risk appetite back to markets after a rather dark week. Today’s industrial production data to be published in the U.S. will be determinant to decide what direction markets will take, if risk appetite continues, we will see most of the currencies rallying versus the yen.
EUR/JPY traded at 131.54 as of 10:53 GMT from a previous rate of 130.45. CHF/JPY traded at 86.61 from 85.95.

Brazil’s Real Hit One-Week High on Retail Sales Data

The Brazilian currency rebounded against the U.S. dollar after May retail sales were published today, with better than expected figures, indicating that the Brazilian economy is recovering from the worse recession since the real was introduced in 1994.
Both international and national events helped the real to gain today against several currencies, in Brazil, retail sales grew 4 percent in May in the annualized figures, improving traders confidence forcing the national stock exchange up, after a bearish previous week. Several international news since the beginning the week brought risk appetite back in the currency market, and being the real one of the most high-yielding currencies available for trading, foreign investors returned to South America’s biggest economy assets.
USD/BRL fell to 1.9686 as of 23:21 GMT from a previous rate of 1.9813.

Mexican Peso Declines Further on Economic Outlook

The Mexican currency, highly dependent on its main trading partner, the United States, posted a sixth day of losses against the greenback on concerns that the economy in the region will not rebound as soon as forecasts predicted.
The peso reached the lowest level in two months against the dollar as the U.S. economy has been showing signs of further economic problems, and an expected rebound in the Latin American nations’ economy will take longer than previously forecast. Mexico entered its first recession since 2001, as the economic conditions of its main trading partner, the United States, damped demand for Mexican exports, affecting negatively the country’s economy and currency.
USD/MXN traded at 13.7100 as of 23:19 GMT from a previous rate of 13.6815.

Ruble Declines as Russian May Enter Deeper Recession

The Russian ruble completed a week of consecutive losses versus the euro and the dollar, as speculations in Russia indicate that the recession will be depper than previously announced.
Several reasons brought the Russian currency down since last week, which lost against the euro and the greenback for seven days in a row after oil prices went down, the national budget deficit widened and the interest rates in Russia suffered the fourth cut in less than 6 months. Economists stress in the fact that a weakening demand for oil and growing concerns regarding the global recession are weighing on the ruble, that may extend its losses as long as this negative scenario prevail.
USD/RUB traded at 32.76 as of 23:33 GMT rising from a previous rate of 32.67.

Yen Weakens on Stock Prices Rebound

The yen, which rallied for almost two weeks versus the pound and the euro, entered the second day of declines against the Eurozone currency, as speculations today led investors to purchase high-yielding assets in equities markets.
The Japanese currency declined versus all 16 major traded currencies as optimism returned to global financial markets on speculations that the Goldman Sachs Group Inc. will reporter bigger earnings today, and New Zealand’s Reserve Bank Governor Alan Bollard stated today that signs of a global economic recovery emerged, bringing confidence back to investors to purchase high-yielding assets in equities markets, damping demand for the safer attractiveness of the yen. Adding to the daily positive news favoring emerging markets and high-yield, a report in Australia showed that business sentiment was rather positive, providing support for the Aussie to climb against the Japanese currency.
Today, the earnings report to be published from Goldman Sachs will be a determinant factor for risk appetite during this week, according to Analysts. This week, provided that risk appetite returns among traders, may experience a significant fall for the Japanese currency, who rallied nonstop for almost two weeks on growing concerns that the global slump will be longer than expected.
GBP/JPY traded at 152.00 as of 11:04 GMT from a previous rate of 147.65. EUR/JPY also climbed from 128.22 to 130.21.

New Zealand Dollar Rebounds on Central Bank Statements

The New Zealand dollar posted its first climb in a week after a central bank statement which affirmed that the Southern nation will recover from the global slump at a faster pace than its main trading partners boosted attractiveness for the kiwi.
After Reserve Bank of New Zealand Governor Alan Bollard declarations today that the New Zealand economy will climb faster than its trading partners, the national currency reached a one-week high and posted the sharpest rally since a U.S. employment report two weeks ago brought pessimism back to equities and currency markets. The renewed confidence in the kiwi and New Zealand’s economy helped speculations that the interest rates in the country will be increased during the next 12 months, since domestic evidences already indicate that New Zealand is rebounding from the worst recession in 30 years. In the neighboring Australia, the national currency also climbed as a report showed business sentiment turned positive for the previous month, adding attractiveness for assets in the region.
Analysts are confident but at the same time cautious regarding the New Zealand dollar outlook, they affirm that even if domestically the nation is providing evidences for optimism and confidence, it is hard to determine what direction markets will take before the U.S. reporting season.
NZD/JPY climbed to 58.97 as of 11:59 GMT from a previous rate of 57.37. NZD/USD traded at 0.6334 from 0.6217.

Canadian Dollar Continues Drop as Commodities Price Falter

The Canadian currency ended its sixth week of losses against its U.S. counterpart as commodities and stocks dropped moved by concerns that the global slump will be longer and deeper than previously predicted.
The Canadian currency, one of the most linked to stock and commodity prices, lost against the greenback this week as the crude oil dropped the most since January, and considering that raw materials account for more than 50 percent of the Canadian exports, the loonie outlook was directly affected by this bearish sentiment in commodities markets. A report during the week added pessimism for the Canadian economy forecasts, as unemployment numbers rose more than expected in June.
USD/CAD ended the week being traded at 1.1619 from a rate of 1.1675 in the beginning of the week.

U.S. Dollar Rallies Against All Majors on Risk Aversion Wave

The greenback, as the dollar is often referred to, climbed versus virtually all of the 16 most traded currencies, as unfavorable economic reports worldwide brought risk aversion up among traders this week, favoring the low-yielding safety profile of the North American currency.
Since last week’s employment report in the U.S. showing worse than expected numbers, risk aversion has returned to markets, and this week, multiple news coming from North America, as a report showing a fall in consumer confidence, and globally, as pessimist speculations for several European Union nations, pushed equities markets down globally, reflecting in currency markets movements. The Swiss Franc lost against the dollar as central bank’s President Jean-Pierre Roth said policy makers will continue to buy foreign currencies to stop the national currency rally. The Ruble lost against the dollar after Bank Rossii cut its benchmark interest rates and the crude oil, the main Russian export, fell below $60 a barrel in New york.
Analysts believe that the U.S. dollar may continue bullish as it is hard to expect that extremely optimistic news will revert the current pessimistic trends in currency and equities markets. The dollar’s position as the main world currency may be discussed in the upcoming weeks, which is the only foreseeable factor that can bring the greenback down for the short-term future.
USD/CHF ended the week at 1.0858 climbing from a previous rate of 1.0777. USD/RUB traded at 32.7380 from 31.8580.

Chilean Peso Declines as Interest Rates Reach Record Low

The Chilean peso hit the weakest level in three weeks as the national central bank slashed the benchmark interest rates to a record low for the South American country.
The Chilean central bank set the national interest rates to a record low of 0.5 percent, from a previous level of 0.75, in order to stimulate the emergent South American economy which has also suffered the consequences of the global slump. The copper, one of the main Chilean commodity exports, has also declined adding pessimism for the Chilean currency outlook. The peso, which was one of the best performing traded currencies in the first quarter, posted a weekly loss as risk aversion is back among traders.
USD/CLP closed the week at 551.15 from a previous rate of 548.75.

Canadian Dollar Weakens as Crude Oils Decreases

The Canadian dollar slashed its previous gains as the crude oil fell for a sixth day in a row, on concerns that a longer global slump will damp demand for energy in the U.S., the main destination for Canada’s commodity exportation.
The Canadian currency reached a seven-week low against its U.S. counterpart as its attractiveness declined significantly on concerns that the global slump will be longer than expected, provoking a new wave of pessimism which brought investors to safer positions in the currency market, being the yen, this week’s best performing option so far. The crude oil, Canada’s main export to the U.S. was traded at near $60 in New York, the lowest level since May 26.
USD/CAD traded at 1.1663 as of 23:44 GMT after peaking at 1.1720 in today’s session and remaining stable in the intraday comparison.

Brazilian Real Rebounds on Commodities

The Brazilian high-yielding currency, declined for almost a week as concerns regarding the global rose, but today it rebounded as commodities rallied, spurring demand for the South American country’s currency.
The Brazilian real had favorable news that supported the currency to post its first gains versus all majors in a week, as car sales in China rose the most since 2006, fueling demand for high-yielding assets. Metallic commodities rebounded today, mainly the copper, after Alcoa Inc. posted smaller losses than forecasts, indicating that demand for commodities may be recovering, a sign that can be interpreted as a global recession easing indication.
USD/BRL traded at 1.9910 as of 19:29 GMT from a previous rate of 2.0175 in the intraday chart.

Polish Zloty Climbs as Euro Entry May Start This Year

The Polish zloty, which have severely devalued versus the Eurozone currency when the global slump struck Europe last year, rose today as Polish government affirmed that the euro entry process may start this year for the Eastern European Nation.
The Polish Finance Minister Jacek Rostowski stated today in an interview given to Gazeta Prawna that the zloty may be stable enough during this year’s second semester to start the euro admission process, immediately reflecting on the Polish currency price, which also rallied supported by a rebound in risk appetite this Thursday, making investors to purchase high-yielding currencies like the Australian dollar and the Brazilian real.
EUR/PLN traded at 4.3503 falling from a previous rate of 4.4242.

Australian Dollar Hits Two-Week Low on Jobs Data Speculations

The Australian dollar, one of the main high-yielding currencies among the 16 most traded, has been witnessed a sharp decline since last week’s new wave of pessimism struck equities and commodities markets.
Since last week the Aussie entered a significant downtrend mainly against the yen and the greenback after a U.S. employment report indicated more-than-expected job cuts in the North American nation, suggesting that the global slump will still be the main world financial scenario for an undetermined period of time. The Australian dollar is down for almost a week as stock markets have been bearish for almost a week, and tomorrow, an Australian jobs report is likely to show that the unemployment reached the highest level in six years, adding to the already negative outlook for the Australian currency. The Aussie high-yielding profile lost attractiveness as investors look for safety purchasing assets mostly priced in U.S. dollar or in yen.
Economists affirm that a combination of two individual factors weigh negatively on the Aussie’s outlook, the new wave of optimism, and tomorrow’s jobs report, which is likely to come negative. The Australian dollar has climbed significantly as the global economy showed signs of recovery, but as the global slump insists to affect markets, we will be likely to see a weakening Aussie for the next weeks.
AUD/USD fell to 0.7849 as of 8:53 GMT from a previous price of 0.7955. AUD/JPY traded at 73.92 from 75.77.

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Japanese Yen Cross Pick

Following up with the NZD/JPY short recommendation from the previous week, the drop in risk appetite triggered the entry I placed at 61.60, and filled my target at 60.59, the 6/24 low for a gain of 101 pips. As market participants continue to weigh the outlook for global growth, the Japanese yen may continue to strengthen against its major counterparts over the near-term as the low-yielding benefits from safe-haven flows, the kiwi-yen may continue to trend lower over the month to retrace the advance from earlier this year. As a result, I have placed another sell entry at 58.49, the 5/19 high, and placed the target at 55.78, the 38.2% Fib of 44.23-74.59, with the stop at 59.88, the 50-Day SMA, and will move the stops accordingly if the position takes profit.

World First Foreign Exchange - 8th July 2009 - Sterling Looking Increasingly Likely To Fall

The decline in the pound’s strength that we warned of 2 weeks ago has begun as sterling endured another day of losses against its major trading partners. Moving through trend support against the dollar yesterday points to a cable rate of around 1.57 and possibly lower from there. It’ll come as no surprise as to what’s driving it.
Stock markets were once again lower yesterday as US corporate earnings numbers weighed on sentiment. It is becoming inlcreasingly obvious that a poor earnings season will have wider reprecussions than just on a corporation’s balance sheet. Sterling speculators also believe that there is significant event risk surrounding Thursday’s Bank of England meeting and announcement. We would suggest that should the MPC decide to increase the quantitative easing facility that sterling will probably get mullered as fears over our fiscal position as a country evolves. Raised public debt is obviously the way to get people talking about cutting the credit rating of the UK; a potentially apocalyptic occurrence.
News from the NIESR was also poor in that they think that the bottom of the recession was not in Q1 and that a 0.4% fall in GDP is likely in Q2 for the UK economy; all things are pointing to a weaker sterling in the short term. Unfortunately weak data from Europe is also something we are not able to rely on any more; German Factory Orders exploded higher posting an increase of 4.4% against a consensus view of 0.5%.
Following the NIESR warning over our GDP figures we get a look at how the EU performed over Q1 as their figures on growth are released at 10.00 BST while BRC shop prices are due at 10.30 and German Industrial Production is expected to rise; verification will come at 11.00. G8 news flow will also have an effect today although one of dollar’s major critics Hu Jintao, the Chinese Premier, has returned home to deal with the breakout of violence in Urumqi.
World First’s Twitter page is up and running and we will be live ‘tweeting’ the impact of all these data releases and how they affect the markets. Click below for up-to-date news on all things currency. The address is http://twitter.com/World_First

Foreign Exchange Markets Stagnant Before Non-Farms, ECB - World First’s Currency Exchange Morning Update - 2nd July 2009

Strong PMI figures from around the globe served to increase the belief that the recovery is coming soon with equity markets and other risky assets getting a good start to the 3rd quarter.
PMI releases in China, Sweden and UK were all better than expected and alongside decent retail sales figures from Germany and strong numbers in the Australian equivalent USD was on the back foot for most of the day.
The US was not helped by data from its own backyard as ADP employment change showed that 100k more jobs were lost in the month of June than expected. That holds a Damocles-esque sword over Non-Farm Payrolls due at 13.30 today with expectations varying from falls of 345k to 495k. Nobody knows where this is going and and we expect markets to be fairly stagnant before hand.
indeed, 13.30 will be a time of great volatility as the European Central Bank’s post decision press conference will start at the same time. As far as the actual decision goes we are with the consensus of a hold in interest rates and possible further EUR strength as the details of the €442 bln of loans made to European banks last week are picked over and the mark looks forward to the covered bond purchase plan.
Other data published today includes Construction PMI from the UK which we hope will push higher and bolster sterling; that’s due at 09.30. European Unemployment is the final major piece of data which we believe will increase to close to 10% unemployment across the channel.

World First’s Twitter page is up and running and we will be live ‘tweeting’ the impact of all these data releases and how they affect the markets. Click below for up-to-date news on all things currency. The address is http://twitter.com/World_First

World First’s Currency Exchange Morning Update - 1st July 2009

All this and more is available on our video blog at http://uk.youtube.com/user/WorldFirstJC
As we predicted yesterday the GBP rally was over before it really began as GDP figures for the UK were very disappointing.
Growth in the UK in the 1st quarter fell by -2.4% against a consensus view of -1.9% as the ONS affirmed the belief that the UK has been in recession for over a year now. The quarterly fall of 2.4% was the largest decline since 1951; a year which saw Elvis Presley drafted into the US army, the first motorway opened outside of Preston and instant noodles in British shops for the first time. Technical analysts will look at the move on sterling as a ‘false break’ and will look for a decline from here in the value of the pound.
Risky assets were not helped by the news that US consumer confidence was also worse than expected which acted as a plague o’er both our houses’. Stock markets lost ground as investors came out of positions at the end of H1 and banked profit.
Sterling was pushed lower by the euro as its inflation reading for June was slightly better than expected: flash CPI posted at -0.1% against a consensus of -0.2% as large falls were seen in food and oil prices.
Data today is mainly forward looking and will give a good idea of economic prospects as we progress through Q3. PMIs for the European and UK manufacturing sectors are due at 09.00 and 09.30 BST respectively with growth seen for the UK and stagnation sought for Europe. A similar measure is out for the US at 15.00 while ADP employment change, the precursor to tomorrow’s non-farm payrolls announcement, arrives at 13.15.
World First’s Twitter page is up and running and we will be live ‘tweeting’ the impact of all these data releases and how they affect the markets. Click below for up-to-date news on all things currency. The address is http://twitter.com/World_First