Today is a very big day for Andy Murray who has just Rafael Nadal between him and a Wimbledon Final. They have played 10 times before and the score is 7-3 to Nadal but both are on very good form and Murray is just getting to his prime so it should be a terrific match.
Sterling traded within recent ranges yesterday after it emerged that UK manufacturing was suffering due to poor demand from a beleaguered Europe but the Pound was both boosted and weakened through the day as the outflows from other currencies helped the Pound and the rather ominous credit conditions report from the Bank of England had an entirely opposite effect. In a kind of profit of doom type of report, the Bank warned that credit conditions are likely to deteriorate later in the year as mortgage and business lending falls. That is a heads up to the government which is looking at ways to force the banks to lend more.
The data that really got the volatility going was the US pending home sales report which showed a 30% drop in May compared to April and gave us an annualised drop of 15.9%. This just added to the recent stream of poor US data and caused a bout headless-chicken like squawking and running around as investors scooted their funds out of riskier assets and into the likes of the US treasury and the Swiss Franc.
This set the tone for a very big day for the US Dollar today as the US employment report for June is published at 13.30 BST. Recent job data suggests this will be a very negative report and a rise in the unemployment rate to 9.8 percent is highly likely. The May figure showed some improvement but that was largely linked to the hiring of thousands of people to carry out the government’s census. President Obama needs a good news story on jobs because he faces a tough run up to the November Congressional elections unless he can get some good news for the economy and employment is a real vote loser. The US Dollar, which weakened for most of the day yesterday, could well have another poor day today. We have in the past seen bad US news actually strengthen the US Dollar as nervous investors opt to stash their funds where they will be safe; the US treasury certificate but there are other options and the current Swiss Franc strength gives a very big hint as to where that money has gone. Be aware though that this is the last working day before the US Independence Day holiday so whatever happens during the day is likely to cause a bout of profit taking before the US markets close. In other words, a decision to see what happens on Monday could be costly.
Overnight news that the new Australian Prime Minister has reduced the tax demand on mining companies; a policy that lost her predecessor his job, has been seen in a positive light by the markets. Most believe the agreement to tax the sector at 30% rather than the punitive 40% proposed by Kevin Rudd and to re4lax some of the other more damaging proposals will retain some stability in the Australian economy and investors seem happy to take advantage of the high interest rate yield in Australia as long as stable conditions prevail. I am sure the mining companies and their shareholders are hugely relieved as well.
The Euro stabilised yesterday as the fears over whether EU banks would be able to refinance their loans subsided. The European Central Bank made available €111 billion of funds for 6 days to ease the transition between funding options for banks and that seems to have calmed a lot of nerves. This morning’s EU employment data will give traders something else to focus on but it is a fair bet that unless the outcome is dramatically at odds with the general market forecasts, most traders will be more interested in the US employment data due for release around the European lunch break.
And finally, there appear to be a whole heap of dastardly fox stories in the news wires. According to the press, if they are not attacking children they are sneaking around people’s bedrooms but anyone who knows foxes will tell you that they are largely scared of or at least very suspicious of humans - and so should they be. However, if I put my conspiracy theory hat on for a minute, it does seem odd that the newspapers which are more likely to print fluffy cuddly fox cub pictures are all damning the little red beasts just when the new government is planning to review the hunting ban. It may of course just be a coincidence but I don’t trust ‘em. The politicians that is; not the foxes.
That said, may I wish you a fab weekend, lots of warm sunshine and lots of cold drinks and may I wish all our American readers a very Happy Independence Day.