UK
GBPEUR traded within a tight 44 pip range on Friday with a high of 1.2389 and a low of 1.2345, the weekend’s trading has been mostly downward for this pair with the euro gaining around a cent to trade as low as 1.2251, sterling has recovered slightly to trade this morning around 1.2309. With two strong sets of resistance just over 1.24, it is more likely we will see a further test of technical support at 1.2301 especially given the increase in confidence coming out of Europe this weekend.GBPUSD steadily lost ground through Friday’s session, opening at the high of 1.5524 and closing near the low of 1.5405. Sterling has recovered slightly over the weekend and this morning markets have opened around 1.5539 after the weekends low 1.5460. Key resistance to break on USD is at 1.5630, just above the highest rate of last week which was 1.5599.
Britons expect the annual rate of inflation to rise in the coming years and stay firmly above the Bank of England’s 2% target a survey showed Friday.
The BoE approval rating among Britons fell back in May to near its lowest on record since the survey began in 2001. The public’s “net satisfaction” with the way the BOE is doing its job to set interest rates and control inflation fell to a balance of +11 in May from +20 in the last quarterly poll in February.
Chancellor of the Exchequer George Osborne said yesterday that the UK recovery is being “killed off” by the euro zone’s deepening crisis and the UK economy faces “huge”risks from a disorderly breakup of the region.
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WORLDWIDE
Once again we have seen an extremely volatile weekend in the currency markets. The euro is off to a great start this week, up almost 1% against the US Dollar and sterling following news yesterday that the Spanish banking sector has effectively rubber stamped a capital injection of up to €100 bn. After a hastily organised video conference, lasting more than two hours on Sunday, the 17 euro zone finance ministers issued a statement saying they were “willing to respond favourably” to a Spanish plea for help. The Spanish stock market responded favourably with Government owned Bankia gaining 16%.
EURUSD opened at the session high of 1.2571 and fell steadily through the course of the session on Friday. Despite a small, late recovery from the 1.2437 low the pair closed at 1.2487. During the weekend, at the same time as the euro gained versus sterling, we saw an identical strengthening against the US Dollar to move up over a cent in a few minutes to trade at 1.2665. This morning the session has opened around 1.2618. The gap from lower support to top resistance in this pair has extended to nearly four cents now, suggesting we could see plenty of volatilty in the coming sessions.
It seems that the euro’s troubles may only be off the agenda for a short while though. With the Greek elections due on Sunday, we can expect further insight this week as and when polls are released. Renewed discussions of a Greek exit from the euro have been triggered by a crisis in the country’s energy system which has managed to develop a €350m hole in the pockets of power grid operator LAGHE.
Risk trades are sharply higher at the weekly opening, as the market focuses on positive signals from the weekend’s Chinese data. China’s trade balance witnessed an unexpected surplus in May, where Exports, Imports and trade balance exceeded estimates.
The French economy will contract in Q1 this year for the first time since 2009. GDP in the euro zone’s second largest economy, will contract 0.1% in Q2, this comes a day after France’s unemployment rate reached 10% .
On Friday, German exports and imports both fell in April from an all-time high in March. Exports fell 1.7% on the month in April to €90bn, after rising for three months in a row. The decline in imports outpaced this with a 4.8% fall on the month to €73.9bn.
The US trade deficit narrowed 4.9% in April, a sharp pullback in imports and exports to the euro zone suggested the region’s troubles are increasingly affecting the US economy.
Also on Friday, Canadian unemployment rate met forecast and remained unchanged at 7.3% in May.
