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  • IFX Market Report for 18/07/2012

    Daniel Fountain
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    UK

    In early European trade on Tuesday the pound fell after a report showed that the UK inflation annual inflation unexpectedly eased in June to reach the lowest level since November 2009.After choppy trading against the euro and the Swiss Franc during the Asian session, CPI data revealed inflation slipped to 2.4% from 2.8% last month causing the pound to fall to 4-day lows of 1.5255 against the Swiss franc and 1.2695 against the euro, compared to yesterday’s close of 1.5305 and 1.2737, respectively. The next downside target level for the pound is seen at 1.52 against the franc and 1.2658 against the euro.

    Against the US dollar, the pound fell to as low as 1.5554 after Ben Bernanke’s testimony in New York drove up dollar demand, GBPUSD fell from a near 2-week high of 1.5680 seen earlier in the day.

    Bank of England governor Mervyn King said Tuesday that the Bank of England had no evidence that banks were deliberately misreporting their borrowing costs in 2008. King told lawmakers on a parliamentary panel that scrutinizes economic policy that neither the BoE nor the Fed had evidence of dishonesty in the setting of the Libor, but agreed the process was flawed.
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    WORLDWIDE

    Spanish borrowing costs declined on Tuesday in its first debt auction since the government announced the latest round of austerity measures last week in a bid to attain deficit targets amid a severe recession.

    Eurozone finance ministers are likely to meet on July 20 to finalize the €100bn Spanish bank bailout deal struck last month. Spain is set to face a tougher challenge on Thursday when it auctions its medium-to-longer term bonds. The country plans to raise between €2-3bn
    German investor sentiment declined for the third month in a row to its lowest level in six months, adding to signs that the euro area debt crisis is hurting the outlook for the region’s biggest economy. The ZEW Indicator of Economic Sentiment dropped to -19.6 from -16.9 in June.

    Bouncing back from multi-year lows EURUSD hit a weekly high of 1.2317 yesterday and 1.2340 is seen as the next resistance level.

    Canadian factory shipments declined in May, the fourth drop in five months, as refinery shutdowns weighed heavily on results and offset gains in the transportation sector. Financial turmoil in Europe, slowing growth in emerging markets and the US has dampened global demand.

    As widely expected, the Bank of Canada retained its benchmark interest rate at 1%. The Canadian dollar edged higher against its major opponents following the rate announcement. As of 1400pm, the Canadian dollar was trading at 1.5842 against the pound.

    US consumer prices were flat in June as energy costs continued to fall, keeping inflation at bay. The lower inflation of recent months could give the Federal Reserve more confidence as it considers whether to take further steps to bring down unemployment and stimulate the economy.

    Industrial production in the U.S. increased by slightly more than anticipated in the month of June, according to a report released by the Federal Reserve yesterday, with the increase partly due to a rebound by output in the manufacturing sector.

    Homebuilder confidence saw a substantial improvement in the month of July, according to a report released by the National Association of Home Builders yesterday, with the index of homebuilder confidence rising to a new five-year high.

    Federal Reserve Chairman Ben Bernanke delivered a bleak assessment of the US economy to lawmakers on Tuesday, citing a slowdown in economic activity this year and a stubbornly high rate of unemployment and sounded sharp concerns over weakness in the labour market, which Fed officials have made clear is central to whether they decide to enact more stimulus programs.

    Daniel Fountain / 17.07.2012

    Editor, Hotel Designs

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