UK
On Friday morning UK Purchasing Managers’ Index (PMI) which surveys purchasing managers in the services industry came out at 51.0 against a forecast of 51.6.During Friday’s session, GBPEUR started the day at the high of 1.2719 with the euro continuing to strengthen before closing the day at 1.2623. The weekend saw the pair move below 1.26 and hit a new 3 week low of 1.2589 struggling to break technical support in place at 1.2583.
The US dollar also started positively against sterling at 1.5526 before moving above 1.56 after negative employment data was released at 13.30 in the US. This morning markets have opened around 1.5600 and a close above resistance 1.5698 is needed to confirm the recent uptrend.
The key news for the UK will be this Wednesday’s inflation report, where the Bank of England is likely to cut its economic growth forecasts, alongside its outlook for inflation, raising expectations that markets will be handed billions more in financial aid. The previous forecasts, made in May, have proved over-optimistic, having been reliant on more ‘orderly’ progress from European policymakers, as well as improvements in bank lending.
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WORLDWIDE
On Friday the US dollar fell against most major counterparts after US employers added more jobs than forecast in July even as the unemployment rate rose to a five-month high at 8.3%. US non-farm payrolls came out significantly better against a forecast of 101k at 163k moving the dollar from 1.5520 to the afternoon high of 1.5646 against sterling.
Jan Hatzius, chief US economist for Goldman Sachs, has said that additional Quantitative Easing from the Fed will probably be considered later in the year when Operation Twist expires.
EURUSD moved comfortably into the 1.23 level, starting the day at 1.2209 and continued on an upward trend finishing the day at 1.2388. After such a prolonged downtrend, the close above 1.2326 last week was significant and could trigger a rally towards the next resistance at 1.2464.
The euro fell against the yen and dollar, reversing gains, before key data tomorrow that economists say will show German factory orders and Italian industrial output declined.
The ECB is edging toward a bond-buying program that investors say could end up printing money, echoing efforts by the Federal Reserve and other central banks to fix a credit crisis nearing its sixth year.
South Africa’s rand was the biggest winner against the US dollar, climbing 2.1% to 8.1747.
New Zealand’s dollar rose for the third week, after Standard & Poor’s affirmed the nation’s credit rating and said its outlook is stable.
With the Australian Dollar moving over 3.5% in little over a month we continued to see GBPAUD edge closer to a 10 year low of 1.4660, during Friday the pair found support at the low of the day at 1.4752 and closed the day at 1.4799.
GBPJPY advanced 130 pips directly after the US opening bell from 121.65 to break the 122.60 resistance and reach fresh intra-day highs at 122.95, before bouncing off the key level of 123.00.
