UK
Yesterday’s mix of economic data and potential policy intervention remain inconclusive and as suggested in the previous report markets remain range bound. The UK has posted its largest overall trade deficit since records began 15 years ago, indicating weak demand for British goods, both in Europe and beyond, exports fell 4.9%, while imports fell 0.5%.
GBPEUR remains locked in consolidation, King’s reluctance to cut the bank rate was clear and does underpin sterling to some extent. Look to euro news to create the next movement with a break of 1.2730 re-opening 1.2870 as a target. Euro sellers could see 1.2580 as the bottom of the trading range for the time being.
Against the USD the pound traded above the 1.56 level throughout the day reaching a session high of 1.5684 at the very beginning of the London session. This morning the pound has fallen below the 1.56 level with the next support at 1.5561.
The number of homes being repossessed in the UK has fallen to its lowest level since the end of 2010, “The figures show that lenders, borrowers and debt advisers are working together to get through the current period of economic difficulty and keep mortgage possessions in check,” said the CML’s director general, Paul Smee.
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WORLDWIDE
The euro weakened for a third day against the dollar hitting 1.2269 from the high of 1.2386 after economists surveyed by the ECBank predicted the region’s contraction this year will be worse than forecast, giving the bank possible new grounds to lower interest rates again.
ECB board member Christian Noyer said the bond purchase program ‘will be sufficient to have a strong impact on the markets,’ and went onto say that the Governing Council will ‘intervene very quickly’ while ‘favouring bonds with shorter maturities’ amid the heightening threat for contagion.
Greece’s unemployment rate rose to a record high in May as the country struggles through a fifth year of recession. The rate rose to an all-time high of 23.1% from 22.6% in April. It was 16.8% a year earlier.
June’s U.S. trade deficit fell to its lowest level since 2010 as exports reached a record level and imports declined due to sliding oil prices. The U.S. deficit in international trade of goods and services decreased 10.7% in June to a seasonally adjusted $42.92bn.
The number of U.S. workers filing applications for jobless benefits fell slightly last week, continuing to suggest that the labour market is stabilizing.
Canadian housing starts fell 6.1% to an annual rate of 208,500 in July this rate was down from a revised 222,100 units in June. Canada recorded another hefty trade deficit in June, the biggest in 21 months, as imports led by machinery and equipment hit a record high.
Most commodity currencies have performed well of late, in particular the CAD and NOK and AUD. While the trends suggest further strength possible all currencies will be prone to a correction and remain at risk of large sell offs should sentiment change dramatically.
The Bank of Japan maintained its assessment of the domestic economy in its monthly report for August, as firm domestic demand backed by reconstruction from the last year’s earthquake continued to help the nation’s recovery.
China’s trade surplus narrowed in July as export and import growth both slowed sharply, signalling continued difficulty for the world’s second-largest economy.
