UK
UK retail sales surprised expectations by posting a 1.4% increase against a forecast 1.1%; this is from the previous months posting of -2.4%. We saw GBPUSD fall to post a level of 1.5656 ahead of the release and similarly spike to 1.5712 after the release of the data. We also saw GBPEUR fall to 1.2375 to then rally to post a high of 1.2404 after the retail report.The CBI industrial trends survey, meanwhile, showed manufacturer’s output expectations improved, picking up to a balance of +7 in June from -3 in May. These hopes likely helped boost domestic industrial orders, which improved to a balance of -11 in June from May’s -17.
Yesterday late trading saw a sell off across the board against the US dollar, Sterling fell to post a low of 1.5575 against the greenback, this was all fuelled by rumours in the market that Moody’s would be downgrading the UK and US banking system after the US close, of which Moody’s have downgraded 15 global banks.
GBPUSD currently on a downward trend, now finds a level of support at 1.5564 and 1.5475 below that. The pair finds initial resistance at 1.5615, after that look for resistance at 1.5650 mark.
GBPEUR has now broken into the 1.24’s posting a high of 1.2448 this morning, should 1.2468 be broken this opens the way for the psychological level of 1.25 as the next resistance. Looking on the downside immediate support comes in at 1.2406 and after that 1.2345.
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WORLDWIDE
Fifteen of the world’s global banks have been downgraded by Moody’s adding further pressure to borrowing costs. Senior bank executives have bitterly argued. In the UK Barclays, Lloyds, HSBC and RBS have all been downgraded however still stay at investment grade.
EURUSD posted a high of 1.2698 yesterday ahead of the US markets opening, however once the States were open and the rumours continued of a potential Moody’s downgrade we saw the currency pair fall steadily throughout the session to post a low of 1.2532.
The next support level at 1.2519 has already been tested this morning, after that look for support at 1.2490. On the upside a break of 1.2615 opens the way to 1.27.
Spanish banks recapitalization needs are well below the amount set aside in the 100bn emergency package, according to two independent auditor firms. A few hours after the auction, it became clear that the amount provided by Europe earlier this month to recapitalize Spanish banks is sufficient.
The Euro-zone is in recession. According to Euro-zone PMIs activity fell in June, at the same rate as in May. PMI’s are usually a good indicator of GDP growth, and point to a decline of 0.3 q/q in Q2, after stagnation in Q1.
The market looks ahead to the ECOFIN meeting taking place in Rome today, it is rumoured that this will be the plateau to which Spain will formally request a bailout and the ECB will start to piece together future bailout funds, so the market will be looking for comments being released from this summit across the day.
Initial jobless claims fell to 387,000 in the week ended June 16 missing forecasts of 381,000. The U.S. factory sector is expanding but at the weakest pace since July 2011.
The US Philly Fed Manufacturing Index showed a fall off yesterday as it posted a figure of -16.6 against a forecast 0.7. This is an even bigger slowdown from last month’s figure of -5.8 which shows the market that conditions are worsening in the US. The continued weaker data from the US means QE3 remains a firm possibility in the future.
