Daily Currency update for SF members courtesy of Halo Financial

(Catharine Higginson) #1

Two main themes have and will continue to dominate the currency markets; the Greek issue and the British election issue. On the Greek front, yesterday was a biggie; the EU and the IMF stepped nearer to implementation of the rescue plan and Greece stepped nearer to economic meltdown as today’s major strike neared. The currency markets just stepped away from the Euro as the fear of further paralysis hovered in the background. In fact it was more than just a step, more like a stampede brought on by Greece and by German Chancellor Merkel’s warning that any further support for Greece would be borne by banks and creditors as well. That wasn’t a welcome threat and it made the comments of Spanish premier Jose-Luis Zapatero sound a tad hollow. He denied wild reports that Spain would soon need to ask the IMF for a rumoured €280bn and described the suggestion as “absolute madness”. Sadly it sounded a bit like the sort of support that football clubs give to a failing manager just before they sack him; a bit unenthusiastic and sadly lacking certainty and the fact that one of the credit ratings agencies downgraded Spanish government debt last week doesn’t help his argument. On the basis that smoke and fire generally accompany one another, most traders sold the Euro.

In the UK election we are on the last day of campaigning and the rhetoric is heating up; Cameron is saying “Vote for me”, Clegg is saying “Vote for me” and some of the labour party members are saying “Vote for anyone as long as they aren’t Tory”. Cries of “desperation” were heard around the press. And one Labour candidate has blotted his copybook by saying that Gordon Brown is the “worst Prime Minister ever”; hardly a way to get a cabinet job if Labour were to win but if the current polls are right, roughly three quarters of the British population agree with him. The difference is that they aren’t all looking to get elected in G Brown’s party.

All this nervousness is keeping volatility high and that is good news for anyone needing to trade Sterling in either direction. However, the news that the latest polls are pointing to a conservative win; if not an overall majority, meant the Pound strengthened through yesterday. The demise of the Euro obviously helped and so did the report that manufacturing orders reached a 15 year high as the weakness of the Pound made British goods more attractive to overseas buyers.

Meanwhile, the US Dollar was benefiting from positive data; US manufacturers reported their best results in 6 years as the US recovery starts to look more believable. The US Dollar is still very much a safe haven currency so we shouldn’t be surprised that it strengthened while the Euro was being sold off but solid domestic data is always a fillip for any currency and that is what we saw yesterday. Most traders are focussed on Friday’s US employment report which may well surprise to the upside; further boosting the US Dollar.

Overnight news of a substantial jump in Australian building permits stopped the rot in the Australian Dollar but the 60p to A$ 1 level is still the crucial break point. That equates to A$ 1.6666 to the Pound and has proved a very tricky resistance level to shift.

Today brings Uk and Eu purchasing managers indices, Eurozone retail sales number and a pre-emptor to the US employment data in the guise of the ADP payrolls report. Other than these, there is not much else to get us all hot and bothered. Obviously, the two main themes remain in place with UK parliamentary candidates having less than a day to make their final pitches to the electorate; thank goodness for that, and the Greek drama still playing out across Europe. Sterling hit its highest level against the Euro since August 2009 this morning but looks very toppy and very choppy and those who don’t buy any at these levels could well be very stroppy so I’ll stop…y now.

Halo Financial - Contact Us