IFX Market Report for 20/07/2012

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    Sterling gained against the currencies of the U.S., Europe and Switzerland, reaching new highs not seen since October 2008 against the Euro and a 17 month high against the Swiss Franc.Sterling reached a high of 1.2834 despite having followed the EUR upside on EFSF rumours, the EU’s official rejection of those talks didn’t trigger a retracement unlike in the Euro. At the time of write GBPEUR is at 1.2793

    Aginst the CHF, sterling a high of 1.5408 having climbed up from a high of 1.5296 on the back of risk reversal away from the safe haven currencies.

    U.K. retail sales disappointed for June up by 0.1% from May and by 1.6% from the previous year, coming in lower than analysts’ respective growth forecasts of 0.5% and 2.2%.


    The GBPUSD rally that saw it break the psychological 1.57 level ahead of the US jobless claims data wasn’t retracted by the weak figures and has continued to stay above the 1.57 level. GBPUSD reached a high of 1.5721, up from 1.5646 at the start of the session.

    EURUSD initially managed to hit a week high of 1.2320 on the back of rumours of a EFSF rumour before retracting to hit a session low of 1.2232. EURUSD is currently trading at 1.2274
    With tight supplies of affordable homes limiting first-time buyers in the US, the NAR released a report showing an unexpected drop in existing home sales last month. They fell 5.4% to an annual rate of 4.37 million in June from an upwardly revised 4.62 million in May.

    After reporting a notable drop in first time claims for U.S. unemployment benefits last week, the Labor Department released a report showing that initial jobless claims rebounded by more than anticipated in the week ended July 14th. They said jobless claims jumped to 386,000 from the previous week’s revised figure of 352,000
    Manufacturing firms in the Philadelphia area continued to report weak business conditions in July. While the Philly Fed said its diffusion index of current activity rose to a negative 12.9 in July from a negative 16.6 in June, a negative reading points to a continued contraction in manufacturing activity.

    The European Commission that the 100 billion euro rescue fund destined for Spain are to be solely used for the recapitalization of the countries distressed banks. Putting a stop to rumours that earlier in the day that the money could be earmarked for other needs as well.

    Spain’s cost of borrowing soared with The Spanish Benchmark 10-yr yield jumping back above 7%, suggesting that despite the respite provided by the latest round of quantitive easing there is still poor demand for Spanish debt.

    French yields declined as investors dumped the peripheral nation’s debt in their flight to the perceived safety of the French debt. The five-year paper in particular fetched a record low of 0.86%

    Business conditions in Australia weakened in the June quarter, partly reflecting weak demand both at home and abroad. NAB said that its business conditions index fell to -1 in the second quarter from 3 in the previous 3 months.

    Daniel Fountain / 19.07.2012

    Editor, Hotel Designs


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