IFX Market Report for 21/08/2012

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    UK News

    The Bank of England, which cut its growth forecasts this month, is trying to kick-start lending to bolster the economy after the recession deepened in the second quarter. Still, the housing market may remain under pressure as weak consumer confidence and the euro-area debt turmoil undermine demand.The Council of Mortgage Lenders showed yesterday that UK gross mortgage lending increased in July from June, continuing the unsettled pattern of monthly rises and falls as one-off effects alter the market on a monthly basis.

    Cable continued to test the top of the trading range during yesterday’s session driven by the market’s mood swings amid reports and denials over an ECB bond-buying plan. This morning GBPUSD has hit a two month high of 1.5775. A close above this number will open up 1.5900 as a target however with more than five failed attempts to do this recently another fail will not be a surprise.

    Following Fridays gains GBPEUR remained above 1.27 for most of the day yesterday, hitting an afternoon high of 1.2763 before settling around 1.2740 towards the late afternoon. Overnight some of yesterday’s good performance was lost; GBPEUR retreated and opened this morning around 1.2690.

    This morning public sector net borrowing came in below forecast continuing the deterioration seen over the past few months.

    International News

    The euro slipped as the Bundesbank argued against an unlimited bond purchase program to cap borrowing costs across the periphery countries, while a spokesman for the European Central Bank announced that plans to target the yield curve has ‘not yet been discussed’ by the Governing Council.

    In very similar trading to the close of the week last week EURUSD had a positive morning, opening at 1.2354 the pair quickly hit the day’s high at 1.2368 but sharply fell 0.27% to the low of 1.2296. It was halted by strong resistance at 1.2288 and closed the day just over the 1.23 mark. Overnight the euro retraced some of those losses and opened this morning fractionally over 1.24.

    Yields on Spanish and Italian bonds dropped to a six-week low yesterday on speculation leaders will agree on a plan to contain the debt crisis. Spain was quoted 23 basis points lower at 6.16%, while Italy was quoted at 5.72% down nine basis points

    The Australian dollar rose against all of its major counterparts before Europe’s leaders meet this week to discuss measures to stem the region’s debt crisis. The AUD strengthened versus the USD and JPY on prospects the European Central Bank will try to cap bond yields in the euro area, supporting investor appetite for riskier assets.

    After the RBA Minutes released last night, AUD added to yesterday’s gains against most of its major peers as the Reserve Bank of Australia made no mention of intervening to curb the currency’s strength, which has persisted despite a decline in the terms of trade. GBPAUD is currently trading below 1.50 at 1.4986.

    New Zealand Inflation Expectations (YoY) from the RBNZ decreased to 2.3% in 3Q from a previous 2.4% showing little change. The ongoing muted inflation expectations will add to the view that the RBNZ has plenty of time on its hands before it needs to contemplate a rate hike.

    Canada’s dollar held near its strongest level versus its US counterpart in more than three months amid improved US economic growth prospects and speculation European officials are moving closer to curbing their sovereign-debt crisis. The currency gained 0.2% last week, marking the sixth consecutive weekly gain.

    The Polish economy, after many quarters of resilience to the Euro zone’s crisis, has shown signs of slowing this year, with the economy expanding 3.5% in the first quarter compared to 4.3% in 2011.

    Daniel Fountain / 20.08.2012

    Editor, Hotel Designs


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