Currency market update for Jun 25, 2012By james tweed • Jun 26th, 2012 • Category: Currency
Significant items this week:
Tues 26th June UK – Public Sector Net Borrowing for May.
US – Consumer confidence
Wed 27th June EU – German CPI
US – Durable Goods orders
Thurs 28th June EU – Council meeting, German unemployment
UK – GDP
US – GDP
Fri 29th June EU – Council meeting, German retails sales.
Thank you for downloading the foreign exchange market report podcast for June 25th from Coracle Online and Crossbar fx.
The US Dollar paused for breath after rallying against all the other major currencies amid persistent concerns over Eurozone debt and after the Fed opted not to pump any more QE into the monetary system. Risk aversion was also supported by the downgrading of many European and US based banks by the ratings agencies. The Eurozone was buoyed by the news that the Greeks voted in the New Democracy party which are pro Euro, and so averted a disorderly exit from the euro, for the time being at least. Spanish and Italian bonds fell from recent highs, but German business confidence has fallen to the lowest levels in 2 years. So, its been mixed messages coming from the EU: no catastrophe yet, but growth is slowing (even in Germany), unemployment is rising across the zone and Spain have formally requested 100 billion Euros to assist their banks after an independent audit found they would need 62 billion Euros. The latest summit of the 4 largest members produced very little in the way of a positive framework for tackling the regions problems, and this week’s EU summit of all their members is expected to be a disappointment.
Meanwhile the US issued $267 billion in Operation Twist which is its programme of selling short term securities while buying longer dated bonds in an effort to support the flagging US economy. Oil sank below $90 a barrel for the first time in 18 month as a series of weak manufacturing data releases, most notably from China, heightened concerns about the global economy.
In the UK Sterling gave back some of its gains mid week, following the release of minutes from the Bank Of England Monetary Policy Committee meeting that revealed that 4 out of 5 members had voted for further QE this month. The markets interpret this as a good sign that QE is on the way and the further printing of another £50 billion will further weaken GBP.