UK
Friday’s trading saw a 0.5% improvement in the value of sterling against the euro. From an opening rate of 1.2643, sterling continued to rally throughout the day reaching a high of 1.2717 at 12:40pm. Despite a slight dip in the early afternoon sterling returned to highs as the session closed, and has averaged at a rate over 1.27 for the duration of the weekend. A close above 1.27 today will confirm Friday’s rally and pave the way for gains towards resistance of 1.2840 this week.Friday’s data was light for the UK with only the Conference Board leading index released at 10:00. Although regarded as having muted influence on exchange rates, the CB Index revealed a gloomy outlook for economy posting a negative 0.8% as opposed to positive 0.2%.
The Ernst & Young ITEM Club report says that it expects consumer price inflation to end 2012 at around 1.7% which will serve to spur consumer spending. Despite this predicted relief to the UK’s struggling economy GDP is still expected to be flat for much of 2012.
On Friday GBPUSD saw a rally with the opening of the US session. Cable moved from 1.5441 at midday to close UK trading at approximately 1.5557. In pre-market trading this morning GBP is holding above 1.5550, but expect movement as today will see the release of both core and non-core retail sales figures for the States; both are expected to show a fractional increase for the sector. Support at 1.5467 is likely to be tested during today’s session and a close above 1.5632 could lead on to further gains.
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WORLDWIDE
Friday was also a quiet day for global market data. Most analysts were watching out for signals resulting from the Italian ten year bond auction. Contrary to the euro’s movements down against its major peers, yields on the Italian 10yr came in lower than expected. It was feared yields would exceed 6.19%, but 5.82% may give traders some confidence.
Early in the US session on Friday EURUSD jumped from 1.2162 to 1.2254 within a few minutes after the Michigan Consumer Sentiment Index fell. Simultaneously, the US dollar also lost ground to sterling, GBPUSD moved up from 1.5459 to 1.5547.
EURAUD has seen extreme losses for the single currency. The current 1.1959 is the strongest AUD has been against the euro in its history. This indicates both that resources remain attractive to diversified investors, and that provided fiscal and monetary policy is being actively managed, as the RBA has demonstrated it is, risk appetite remains in certain sectors.
A Japanese bank holiday has meant that volumes were less in Asian trading, however Asian shares improved slightly on the back of more positive sentiment. The GBPJPY 100 day moving average indicates JPY could move back to around 121, but at present the pair trade at 122.94, with EURJPY at 96.65.
Friday’s US data surprised the market as PPI confounded expectations and posted positive 0.1%. Although not hugely up, forecasts had suggested a contraction of -0.5%.
Friday’s slide of Chinese figures was largely positive reading. The absence of a further slowdown and signs of improvement in some of the key figures suggest the current cycle in China has bottomed out. The figures were received positively in the markets and Asian stocks rose after China announced it will increase measures to support growth.
The focus for currency traders is now on Ben Bernanke, who will hold his semi-annual presentation on monetary policy in the Congress on Tuesday and Wednesday. Here the market will look for signs of further monetary policy easing, under a scenario where the US economy slows again.
