IFX Market Report for 16/05/2012

    150 150 Daniel Fountain
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    GBPEUR had an erratic session yesterday, falling temporarily to a low of 1.2476 due to better-than-expected German growth data. The drop was short-lived and GBPEUR recovered to hit a session high of 1.2563, a level not seen since Nov 2008. Trading opened this morning at 1.2557
    The recent highs seen in GBPUSD over the last month continued to fall away as USD gained momentum from the increased risk in Europe but also from strong data from the US. The session high was 1.6113 but the pair fell steadily to the 3-week low of 1.6011. Trading opened today at 1.5932.GBPNZD has reached 2.0880 this morning, the highest the pair has traded for 6 months. Mirroring sterling’s recent rise against the Australian dollar, GBPNZD has now moved more than 10% from 1.8625 to 2.0880 in just 3 months.

    UK employment data released this morning showed the Claimant Count dropped by 13.7k, the Claimant Count Rate fell to 4.9% and ILO Unemployment Rate fell to 8.2%.

    The much anticipated Bank of England Inflation this morning painted a gloomy picture of the economy giving a weak growth outlook. The markets responded immediately and the pound fell across the board, GBPUSD has fallen below 1.59 and GBPEUR lost nearly half a cent falling to 1.2509.


    The US dollar out performed a basket of currencies yesterday as investors moved to safe haven currencies after efforts to form a government in Greece failed. EURUSD shed 80 pips within 15 minutes demonstrating the volatility brought about by the crisis-point situation in the Eurozone. The fall continued overnight with EURUSD dropping to 1.2681 as the European markets opened, the lowest seen since Jan 17th.

    Reports emerging this morning suggest that Greeks have withdrawn as much as €700m from local banks. The fall in deposits means Greek banks will become even more reliant on the ECB to help with their operational funding.

    The French economy failed to grow in the first three months of 2012 adding pressure on President Francois Hollande to deliver on his promise to push growth-friendly policies. The new President wants to form a new pact with Europe that would reduce national debts and introduce measures to stimulate growth.

    Greek GDP posted -6.2 change for Q1 2012 and expected to achieve -5% over the year.
    German ZEW Survey of the Current Situation for May showed a significant improvement to 44.1 from 40.7, up also on the 38.0 consensus.

    French President Hollande named French legislator Jean-Marc Ayrault as prime minister shortly after taking office. Meanwhile outgoing French Finance Minister Francois Baroin has revealed that “if Greece crashes out of the Eurozone it would cost France around €50bn net in lost loans”.

    US Consumer Price Index (CPI) YoY for April achieved the 2.3% consensus but fell from the 2.7% previous reading. The MoM for April was flat, down from a 0.3%. CPI excluding Food and Energy YoY and MoM for April showed no change.
    A surprise result for US Net Long-Term TIC Flows in March saw $36.2Bn against the previous $10.1Bn.

    Italy’s ABI, Tuesday said that the downgrade by Moody’s of 26 Italian banks is irresponsible The reasons given are contradictory, as they cite Mario Monti’s austerity measures as one of the motives of the downgrade while those were the same steps that were previously encouraged.

    Foreign direct investment into China fell for the sixth straight month in April, the latest sign of trouble for the world’s second-largest economy.

    UBS has cut its short-term forecasts for both the Australian and New Zealand dollars against the greenback, citing its weaker view for Chinese growth and poor market sentiment caused by Greece.

    Daniel Fountain / 15.05.2012

    Editor, Hotel Designs


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