The Pound made gains against the Euro while declining against the Dollar as investors increase their focus on growth as a foundation of fundamental strength.
Fundamental sterling traders would have only a low-level piece of event risk to absorb Tuesday. Far more important a concern for the currency going forward will be the overall health of the economy. Economic performance will further determine interest rates and fiscal policy going forward.
The Dollar made considerable gains against the Pound and the Euro yesterday as risk aversion increased due to an article in the Wall Street Journal questioning whether the European stress test of the banking sector has given a true and fair view of the European banks.
Tonight’s main event is the Fed Beige Book ahead of the FOMC in two weeks. It is unlikely to report any progress being made in terms of building momentum in the economic recovery, and should confirm the risk averse attitude of markets.
The Euro declined against the Pound and the Dollar as the Euro is at the mercy of the financial media as the market leverages its fiscal troubles. Significant fundamental concerns or comforts can easily be overlooked depending on the prevailing interests of the speculative ranks. If investors are optimistic, an economically troubled region could be construed as a late bloomer with depressed prices; or a prominence of pessimism could lead to a selloff of a relative leader.
Also to note the Wall Street Journal’s report that government debt exposure in the EU stress tests was understated; and Bloomberg’s stories that Greece had yet to fully disclose the full details of its debt obligations while the Euro region banks will need to raise 240 billion Euros through year’s end are well documented. Nonetheless, for an antsy market, these kinds of reports only fuel fear and a increase in risk aversion.
Data released 08.09.10
UK 09.30 Industrial Production (July)
Manufacturing Production
UK 15.00 NIESR GDP Estimate (3 Mths to August)
US 19.00 Federal Reserve Bank Publishes Beige Book
US 20.00 Consumer Credit (July)
