IFX Market Report for 23/07/2012

    150 150 Daniel Fountain
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    After last week’s much improved employment situation in the UK and also the inflation figure falling to 2.4%, this combination of surprising improvements provides a much brighter overall economic situation. Given the recent turn of events perhaps another surprise could come in the Q2 GDP release on Wednesday which is expected to show the UK is still in recession.Public Sector Net Borrowing excluding financial sector interventions stood at £14.447bn in June, up from £13.919bn in the same month a year earlier, compared with the median forecast of £13.2bn.

    GBPEUR started the day at the low of 1.2786 but quickly moved towards the psychological level of Oct 2008’s highs at 1.2868 before finding resistance at 1.2866. During the weekend it has broken to a new high of 1.2891 but has settled down to around 1.2860 again this morning.

    GBPUSD also started positively at 1.5694 but failed to break 1.57 confidently as the dollar strengthened, moving to the low of the day at 1.5623 as the risk??’off plunge continues. This morning markets have moved to around 1.5560 and the pair may test support levels at 1.5530 today.

    The change in the asking price of homes for sale in the UK dropped to -1.7% compared to last month release of 1% and May’s 0.0%.


    The euro continued to fall against major counterparts on Friday as the formal approval of Spain’s bank bailout by Eurozone finance ministers offered it little relief after the Spanish Valencia region said it will seek central government help to repay its debt.

    EURUSD broke below the 1.22 mark at the beginning of the New York session and hit a fresh 2 year low of 1.2145. We have opened up this morning after moving through a number of support levels and currently trade at a low of 1.2085.

    The 10-year Spanish bond yield climbed 28 basis points (bps) to 7.309% of Friday, crossing the psychologically crucial 7% mark for the first time in more than a week. This morning we have seen it continue to increase, hitting levels of 7.55%.

    Gerda Hasselfeldt, floor leader of Christian Social Union, has been quoted as saying that the party would reject any efforts by Greece to ease its’ bailout terms. The official said “What’s clear for us in the CSU is that we cannot support any move to renegotiate the substance or timeframe for those conditions” adding “If a country is not in a position to fulfil its obligations or is unwilling to, then it must leave the Eurozone”.

    The euro slid to the lowest level since 2000 versus the yen on concern the region’s crisis is far from being resolved even after officials agreed on an aid package for Spain’s banks. Japanese Vice Finance minister repeated that he is ready to take decisive action to intervene in the currency markets. The Yen also moved against the Pound from 123.29 to a low of 122.63.

    US stocks opened sharply lower on Friday snapping 3 days of gains, as risk aversion surged amid Eurozone woes.

    Asian currencies had a second weekly advance on speculation the US and China will adjust policies to revive the world’s two biggest economies, boosting demand for riskier assets.

    Early this morning Australian PPI came in higher than expected this morning and GBPAUD moved from 1.5026 up to 1.5110 immediately after the news.

    Daniel Fountain / 22.07.2012

    Editor, Hotel Designs


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