Daily Currency update for SF members courtesy of Halo Financial

(Catharine Higginson) #1

As suspected, Sterling had rather a good day yesterday. The economic growth data (the change in gross domestic product to give it its proper name) was spot on forecast and at 0.3% growth was a slight improvement on the first estimate published a month ago. That, combined with further details of the UK government’s spending cuts and the Queen’s speech outlining the rest of their plans was enough to give Sterling a boost. It finished the day at higher levels against all comers. The lack of UK data today should prompt a bit of profit taking and that began even before the UK markets had closed yesterday.

The Euro was on the back foot all day yesterday while the debate about what is going to happen to the euro rages on. The financial support package is seen as no more than a sticking plaster (band aid) to mask the structural problems of the Eurozone. One commentator put it neatly, (in comments I read last night but can’t find this morning) so my apologies for the plagiarism but I can paraphrase his comments as, either the Eurozone needs to integrate fully on a financial basis or the Euro needs to be abandoned. It is a stark warning that fits my belief from day one of the Euro’s establishment. The member states were always fearful of taking that final step towards full currency integration; that of combining fiscal policy. And now that we have been through the last year of Eurozone drama, I find it highly unlikely they will be tempted to do so; well certainly the Germans won’t. However, Pier Carlo Padoan, the chief economist of the Organisation for Economic Cooperation and Development (OECD), said this morning that the weaker Euro is good news for the Eurozone and it may even be responsible for the EU avoiding a double dip recession. It’s a bold assertion but we have a long way to go before we can be certain the Eurozone is in a permanent path to recovery.

Elsewhere, the US Dollar remains the currency of choice amongst investors and traders alike. US consumer confidence hit a two year high this month; slowing job losses and stable inflation will have helped in that and the confidence that international investors have in the American government’s ability to both repair the economy and repay debt is keeping the US Dollar in demand. The Sterling - US Dollar exchange rate remains in a band between $1.42 and 1.45 and seems set to stay there until it is removed with a crow bar.<br><br>Overnight news that the Australian economy is in bullish mood came from the Westpac leading indicators index which posted its greatest gain in four months. However, this data is for March and a lot has happened in the interim including the Reserve Bank of Australia being cautious enough to virtually confirm they are not raising interest rates any further and a cooling of commodity prices which account for a large proportion of Australia’s exports. The Australian Dollar strengthened initially but that pace has slowed. However, I still think we will see another dip to A 1.72 or lower on the Sterling - Aussie Dollar exchange rate as the lack of UK data weighs on the Pound.

The Sterling - Canadian Dollar exchange rate has moved higher and consolidated in the last five days or so. It is back above the C$ 1.52 level that was a significant support level through March, April and early May. C$ 1.56 was the resistance level for that period so we have to be hopeful we will see another test of that line in the days ahead. Tensions in Korea, the failure of a Spanish Bank and a drop off in the recent high commodity market prices are all weighing on the Canadian Dollar but it does remain a very attractive economy in comparison with most others, so I am not expecting a massive dive in the value of the Canadian Dollar.

And finally, I don’t know if you clicked on Google’s main page in the last few days but the tribute to Pac Man’s 30th birthday was a playable version of the game. It was great and I must admit to having a sneaky play when I first saw it. All those nights in local pubs playing the table top version of the game shone through and I was pretty good at it even if I say so myself. Apparently I was not alone. It is estimated that 549 years of man hours were used up on the day as each visitor to the page stayed for an average of 3 times longer than normal. ‘Addictive’ is just too small a word for it. Gawd help us when it is Tetris’s birthday… Or Donkey Kong’s…or Space Invaders…or Frogger’s… or Asteroids…