UK
GBPUSD began Friday’s session at the low of 1.6179 and moved to an 8-month high at 1.6278 in late trading which is a level not seen since 31st August 2011, markets have seen little change over the weekend and opened this morning at 1.6284. GBPUSD has now rallied from a low 1.5818 to a high of 1.6300 in only 10 trading days as QE3 expectations have increased.GBPEUR opened at 1.2292 on Friday and eventually closed the day at 1.2255. Markets opened this morning at 1.2293 and has reached a high of 1.2306, struggling to breach the next resistance level at 1.2307.
Governor Mervyn King has 10 days left to decide on whether to risk halting stimulus for an economy trying to shake off a recession. Reports starting tomorrow on manufacturing, construction and services, as well as consumer credit and house prices, will set the scene for data building up to a decision on QE on May 10.
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WORLDWIDE
The US dollar weakened across most major currencies since Friday as US GDP came out worse than expected at 2.2% compared to a 2.6% forecast.
During Friday’s session EURUSD hit a high of 1.3270 after starting at 1.3156 which was the low of the day. The weekend trading saw the Euro recover some losses and this morning is trading comfortably above 1.32 again, reaching a high of 1.3264.
Data released this morning showed German Retail Sales continued to improve, posting 2.3% on an annualized basis.
Eurozone Consumer Price Index has showed that inflation across Europe has fallen slightly but less than expected. The smaller than expected fall means ECB are less likely to be forced into further stimulus. This has had a fairly muted effect on the currency markets and EURUSD remains near today’s open price at 1.3229.
S&P Managing Director Moritz Kraemer has said that if Spanish debt ratio slips much further, additional rating downgrades will be likely and create downside risk to almost all euro zone sovereign ratings.
On Friday the Spanish government announced a VAT rise in 2013 and also released data showing unemployment has hit a record high reaching 24.4% and is expected to rise further throughout 2012. Spain has the highest unemployment rate in the EU.
Swiss central bank president Thomas Jordan commented on whether the SNB should introduce negative interest rates stating “We haven’t introduced negative interest rates because the minimum exchange rate has worked very well so far and because it wasn’t necessary”.
On Friday the Italian 10-year bonds were sold at yields of 5.84% which was higher than the previous months at 5.24%.
In early Asian trading on Friday we saw the bank of Japan expand the size of its Asset purchase fund by JPY10 trillion to JPY40 trillion adding that it also believes its 1% inflation target will be reached. After only a two hour rally up to 131.65, the pair has retreated again to trade around 130.50 since the intervention.
