Today's Market Update brought to you by SendMoneyHome - 14/07/2010

July 14, 2010 - PRLog -- Good afternoon, today has seen a lot more positive data from a UK perspective as it gains ground against the Dollar and Euro. Here are some of the highlights from Voltrex, Moneycorp,  Currencies Direct, and TorFX. The pound rallied for the first time in three days which shows signs of increased risk appetite and also a reflection of the positive data for the UK. Inflation levels are lower than those of last month and there is also a consensus that the claimant count being released this afternoon will show jobless claims down by 20,000. The US trade deficit increased unexpectedly which may have caused the dollar to slide on the major currencies.

Voltrex

US Dollar:
The Dollar fell across the board yesterday as equities rallied and risk appetite returned. Cable put in a stellar
performance to move from mid 1.49's to trade over 1.52 in Asian trade last night. EURUSD also experienced a
similar move despite the backdrop of economic and fiscal issues hanging over the single currency.
Today's trade will be firmly geared towards tonight's FOMC meeting and accompanying statement.


Pound:
Sterling was a mixed bag yesterday, rallying against the USD during NY trading but struggling to gain any traction against the Euro. Inflation data released yesterday morning showed annualised CPI, the governments preferred measure of inflation fell to a rate of 3.2%. this is an improvement on last months figure of 3.4 but still well above the bank of England's target of 2%. Sterling could also push on today as UK unemployment data is released. Jobless Claims are expected to decline 20,000 in June as the jobless rate drops to 4.5 percent – the lowest in 15 months.

Euro:

Trading in the Euro yesterday was baffling to say the least. As Moody’s cut Portugal’s credit rating by two
notches to A1 from AA2 but maintained a stable outlook, the Euro managed a 1% gain against the USD and
held a tight range against the Pound. Portugal is classed as one of the club med countries, who's fiscal position
is being closed watched.

http://www.sendmoneyhome.org/voltrex-fx

MoneyCorp

UK inflation figures higher than expected
- Sterling firmer everywhere
- Next hurdle is today's employment data

The Office for National Statistics revealed yesterday the results of its efforts to calculate the total size of the country's debts, including public sector pension liabilities and payments promised to contractors under private finance initiatives. The bottom line (if it really is the bottom line) is that adding Britain's debt to other previously unacknowledged liabilities produces a figure just short of £4 trillion. The number is roughly four times as large as any government has previously admitted.

Against the US dollar, the yen, the Canadian dollar and the Swiss franc sterling was able to build on its initial gains during the rest of the day. It put in a more chequered performance against the antipodean dollar but managed to stay ahead of them in the end. Sterling/euro encountered a sort of quantum rally that turned into a retreat as soon anyone measured it; up one cent, count to five, down one cent and it was back where it started. Even so, sterling has managed to pick itself up overnight and it opens in London this morning a couple of dozen ticks higher than it began Tuesday.

The four big-league data sets today relate to UK employment, Euroland inflation and industrial production and US (provisional) retail sales.

http://www.sendmoneyhome.org/moneycorp


Currencies Direct

Inflation feedback boosts Sterling
UK CPI rose by 3.2% y/y in June 2010 compared to 3.4% in May, more than the 3.1% average forecast by analysts. RPI decelerated to 5.0% in June compared to 5.1% in May. RPI-X also slowed from 5.1% in May to 5.0% in June. However, core inflation accelerated from 2.9% in May to 3.1% in June, which matched the highest reading since 1997.
The latest inflation data will boost the case by Andrew Sentance who is the sole member of the MPC who is looking for a gradual interest rate rise and said the path to economic recovery could be uneven but that did not equate to a risk of a double-dip recession. "I favour a gradual rise in Bank Rate which would be aimed to avoid destabilising confidence through a sudden lurch in policy."
The main focus this morning will be UK job data. Markets expect claimant count to drop by -20k in June while unemployment rate is expected to be steady at 7.9%. Eurozone CPI final and industrial production will also be released. In the US, main focus will be on retail sales, which is expected to drop slightly by -0.2% in June. Import price index and business inventories will also be released. Also, another main focus will be on FOMC minutes.

http://www.sendmoneyhome.org/currencies-direct

TorFX

GBPEUR/GBPUSD

The Pound rallied for the first time in three days against Dollar yesterday, while the UK currency also peaked above 1.20 versus the Euro, after the latest inflation data beat initial estimates.

The persistent inflationary concerns are adding to pressure on policy makers to begin tightening monetary policy, a potential spur for Sterling, which has dropped 6.1% against the Dollar this year. The record low benchmark interest rate may be contributing to the Pound's weakness and keeping inflation above the bank's 2% target.

Andrew Wilkinson, senior market analyst at Interactive Brokers Group LLC, said that "some of today's rally in the Pound is likely due to increasing expectation for the need to lift rates given the stubborn performance of inflation." Government bonds fell yesterday, while UK stocks rallied for a sixth day, as shares in the FTSE 100 Index jumped 1.8%.
EUR/USD

The Euro declined against the U.S Dollar and Japanese Yen yesterday, as Moody's Investors Services lowered Portugal's credit rating by two notches to A1 from Aa2, which encouraged a renewed widening of European bond spreads. The ZEW index of investor sentiment was also weaker than expected with a decline to 21.2 for July, from 48.7 the previous month.

The data maintained concerns over a renewed downturn in the Euro-zone economy, although officials are keeping a mood of optimism that a double dip recession will be avoided. The Euro found support at lows near $1.25 against the Dollar on technical grounds and there was some support from a successful Greek debt auction, which boosted confidence.

http://www.sendmoneyhome.org/torfx

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