Friday's Currency report brought to you by SendMoneyHome - 30/07/2010

July 30, 2010 - PRLog -- Good afternoon, there have been warnings yesterday and this morning which intimated that the UK recovery might be slowing down. This stemmed from Mervyn King’s statement on Wednesday that people still need to be wary and vigilant going forward. Poor UK housing data was released yesterday and this morning saw that consumer confidence had dropped to a level worse than expected. With the US still struggling, investors have flooded back to the Yen as their safe haven. Moneycorp, Travalex, World First, Currencies Direct and TorFX    provide the market highlights today.

As I continue to circulate my daily currency market reports, I have realised that there is a lot of technical jargon being included in our market reports by our specialists and myself. I have therefore written a short passage entitled ‘Understanding the Currency Markets’ to explain some of the more technical areas that are discussed in the market. It is available on the SendMoneyHome website below the currency rates themselves:

http://www.sendmoneyhome.org/foreign-currency-articles/ex...

Market introduction by Stuart May


Moneycorp

Figures released this morning showed Japanese consumer prices falling by -0.7% in the year to July. Government stimulus measures brought a mushrooming of public sector debt, which currently stands at something over 200% of gross domestic product. The Bank of Japan's policy interest rate has been below 0.5% since 1995 and at 0.1% since 2001.

As for the rest of Thursday's action, the majority of it was consistent with the weaker-growth/stronger-risk-aversion picture. The US dollar, the pound and the Australian dollar were steady against one another; the Canadian and New Zealand dollars and the rand are a touch softer. The safe-haven Swiss franc led the euro, which itself kept ahead of the pound and its companions. Sterling was hampered slightly by weaker than expected mortgage approvals; the euro was helped slightly by improvements in economic, consumer, business and industrial confidence in Euroland.

Overnight news included a 3.5% rise in New Zealand building permits and a three-point fall for UK consumer confidence, from -19 to -22. A raft of Japanese data covered a rise in the unemployment rate from 5.2% to 5.3%, a -0.7% annual fall in the consumer price index, a -1.5% monthly fall for industrial production and a -10.2% fall in construction orders.

http://www.sendmoneyhome.org/moneycorp

Travalex

In the UK GfK consumer sentiment survey was released in the overnight session and did not live up to expectations. The decline to -22 in July from -19 in June could hinder the pound in today’s trading particularly coming on top of a weaker than expected Nationwide house prices survey and downbeat Bank of England lending figures released yesterday.

The euro rose to twelve-week highs against the US dollar as investor confidence in the Euro Zone was sustained by the latest release of upbeat economic data, which has contrasted to the data seen so far in the US. Today, investors will look at German retail sales to see if German consumers are also feeling upbeat. This release will be followed by Euro Zone flash estimates of HICP and unemployment data. Inflation is expected to pick up slightly while the unemployment rate is expected to remain unchanged at 10% across the bloc.

http://www.sendmoneyhome.org/travelex-overseas-payments/

World First

With equity markets flat and with US GDP due today (13.30 BST) traders have been exercising caution in the past couple of sessions. The yen is the preferred currency for those seeking some safe haven flows. This mantle has been stolen from the dollar which now is traded more as a proxy for the US economy as opposed to that of the rest of world as well. Dollar falls are mostly down to bad dollar data now to put it simply.

UK mortgage approvals were announced slightly short of consensus yesterday causing some early pound weakness. While the figure was still nearly double the amount of approvals that we saw in the real depth of the credit crunch in late 2008, it was still very poor. The housing market in the UK, so long a driver of wealth creation and the fuel of middle England dinner party chat, will not recover until the jobs market improves dramatically; a prospect that I do not expect until 2012.

The euro has come in for some weakness overnight as sources quoted an unnamed Moody’s analyst over a possible downgrade to the Spanish sovereign credit rating. The rough oeuvre of the comment was that while the Spanish rating may fall it will not fall as much as Greece’s has over the past year. Spanish unemployment has also risen to 20.09% in the past month.

http://www.sendmoneyhome.org/worldfirst

Currencies Direct

Of late, UK economic data has been extremely positive. However, since yesterday this trend has been broken. Overnight GfK Consumer Confidence fell by more than expected to -22 (consensus -20, previous -19). This follows yesterday's news that house prices fell by more than expected in July, coming in at -0.5% m/m (consensus -0.3%, previous 0%). It appears that concerns about the medium-term impact of fiscal austerity measures on personal finances is outweighing any potential optimism about the recent recovery's momentum, thus keeping demand low.

The euro has continued to push higher against the US dollar as optimism continues to spread throughout Europe following the release of numerous corporate earnings yesterday, all surpassing market expectation. Additionally, the narrowing of Euro zone sovereign debt spreads over recent days has boosted the single currency. This positive sentiment was further helped by continued improvement in Germany's unemployment data.

The US dollar has been on the slide for several weeks now and this negativity in the Greenback could continue further with the release of Q2’s QoQ GDP figure (consensus 2.5%, previous 2.7%) at 13:30 BST. Recent data from the US has been poor with manufacturing and durable goods numbers disappointing the markets. This afternoons GDP figure will be key for the short to medium term trading levels of the dollar and views of it being a safe-haven could begin to fade.

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

TorFX

The Pound has continued to test resistance levels above $1.56 against the Dollar, the highest level since February, but the UK currency has struggled to break above 1.20 versus the Euro, losing 0.4% on the day. UK housing data showed that prices fell for the first time in five months in July, amid tighter lending conditions and waning consumer confidence, as the government prepares to introduce spending cuts.

The Pound has hit resistance levels close to $1.5650 against the Dollar, while the UK currency retreated to lows around 1.1930, before a mild correction early this morning. UK stocks were virtually unchanged by the close of trading last night, as the benchmark FTSE 100 Index slipped just 0.1%. The gauge is still 8.8% below this year's high on April 15th, amid concern that growth will be curbed by austerity measures from European governments.

The Euro rose sharply against the U.S Dollar yesterday, while the single currency has also bounced back against a basket of currencies, including the Pound, as the European economic recovery edges ahead of the U.S and spurs demand for the Euro. A survey released earlier today showed that European confidence in the economic outlook rose to the highest level in two years in July, led by a recovery in services and industrial production.

http://www.sendmoneyhome.org/torfx

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