The Pound made gains against the Euro while reaching a five-month peak against the dollar following the release of robust UK retail sales data. A survey by the Confederation of British Industry showed monthly retail sales in July rose at their fastest pace in three years, beating analysts’ forecasts although helped by a reweighting of the survey.

The Dollar declined against the Pound while remaining relatively unchanged against the Euro after a report showed U.S. single-family home prices rose more than expected in May, according to the Standard & Poor’s/Case Shiller home price indexes.

This news was welcomed after the euro hit an 11-week high against the dollar in the overnight session as solid bank earnings lifted equities and encouraged investors to take on more risk. Investors are drifting away from fears of a double dip recession, with the onset of a rate tightening environment, with a rate hike in India and one expected in New Zealand, flows are returning to higher yielding and emerging market assets and out of the dollar.

The Euro declined against the Pound while remaining relatively unchanged against the Dollar   supported by Germany’s Ifo Business Climate Index for July which beat market forecasts. This data followed favourable Eurozone purchasing manager surveys which helped support the euro yesterday.

Data released 23.07.10

UK      11.00 Land Registry House Prices (June)

US      13.30 Durable Goods (June)

US      19.00 Federal Reserve Beige Book Published

The Pound made gains against the Dollar and the Euro yesterday boosted by data showing Britain’s economy grew almost twice as fast as expected in Q2. Data showed gross domestic product jumped 1.1% on the quarter, the strongest growth in four years and almost twice as fast as forecasts for 0.6%.

In other news last week, the BOE voted 7-1 to maintain their current level of rates, with Andrew Sentance again being the sole dissenter from the decision to leave rates on hold, favouring instead an increase in official rates to dampen inflation risks.

The Dollar declined against the Pound and the Euro yesterday as a bigger-than forecast increase in new home sales of 330K encouraged demand for riskier assets. Given the increasing focus on the possibility of a double dip recession in the US, markets will be keeping a very close eye on this week’s data releases, which include the Fed’s Beige Book on Wednesday. The report is likely to point to the many obstacles the economy face as indicators suggest that the pace of recovery is slowing. Also in the spotlight will be Friday’s release of the first estimate of Q2 GDP, which is expected to show growth of 2.5%; a modest slowing from 2.7%.

The Euro made gains against the Dollar while declining against the Pound as investors risk appetite increased due to bolstered Asian equities. The release of the stress tests on Friday conducted on 91 European banks by the Committee of European Banking Supervisors also has benefited the Euro.

The committee announced that 7 banks had failed the tests with a combined shortfall of 3.5 billion EUR in funding required. Investors were quick to question how stringent the tests were given they ignored the majority of the banks holdings of sovereign debt. European banks had already raised 220 billion EUR over the last 18 months and analysts had been expecting the tests to reveal a funding shortfall 10 to 20 times the 3.5 billion EUR.

Data released 23.07.10

UK      11.00 CBI Distributive Trades (July)

US      14.00 Case Shiller House Prices (May)

US      15.00 Consumer Confidence (July)

The Pound made gains against the Euro and the Dollar as the Pound finds itself undermined by capital flight on heightened investor risk aversion. Also weighing on the Pound are concerns over the negative impact of fiscal tightening on the U.K economy, and the 0.6% on-month drop in the U.K. Right move mid-July house price index versus June’s 0.3% increase.

The Dollar declined against the Pound and the Euro as the Dollar continues to suffer from poor economic data that has pressured it to its lowest levels in over 2-months against the majors.

All eyes are expected to focus on the pace of US economic activity as the second half of 2010 gets under way.

The Euro made gains against the Dollar while declining against the Pound due to mixed views on Eurozone sovereign debt concerns. On one side Smooth government debt auctions in Greece, Portugal and Spain have eased concerns but on the other there is News that the IMF and EU are to suspend a review of Hungary’s funding problem and Moody’s downgrade of Irish debt.

The fate of the euro could also depend on the results of the banking stress tests which are due to be released later in the week.

Data released 19.07.10

US      15.00 NAHB Home Builders Sentiment (July)

The Pound declined against the Euro and Dollar over the bank holiday weekend and is likely to remain under pressure due to uncertainty over growth, the fiscal outlook, and this Thursday’s UK election. Also to note all eyes will be on today’s Manufacturing PMI which investors has been looking to increase to signal that the UK economy is showing more than just green shoots .

The Dollar declined against the Euro slightly while making gains against the Pound on Friday buoyed by improving domestic economic conditions and safe haven flows amid uncertainty amid credit concerns in Europe. The US economy continued to show signs that the pace of recovery is accelerating. GDP grew a robust 3.2% in Q1 while Consumer Confidence rose strongly to 57.9 in April, raising hopes that consumers maybe more willing to begin spending again. The thaw in consumer confidence was borne out in today’s US Consumption figures which rose 0.6% in March. The dollar appears well situated to maintain its gains as both improving domestic economic fundamentals and debt concerns hanging over Europe drive investors into the Greenback.

The Euro made gains against the Dollar and the Pound on Friday while declining slightly yesterday as the euro remains under pressure as investors remain sceptical of a rescue package for Greece. The Euro declined following the announcement of a €110 billion coordinated Euro Zone/IMF bailout for the beleaguered nation that will stretch over the next 3 years. Market reaction to the rescue package was modest with Greek bond yields easing only slightly. The spread between Greek vs. German 10-year bonds fell to 610 basis points from 662 on Friday. The rescue comes on the heels of ratings agency Standard and Poor’s downgrade of Greek debt to junk status and downgrade of Portugal’s credit rating, raising concerns that other Euro Zone countries at risk will also require assistance. How the Euro Zone will resolve the mounting deficits of its lesser performing member countries is casting a pall on the region, its currency and threatens to derail its fragile recovery.

Data released 4^th May

UK      09.28 CIPS Manufacturing PMI (April)

UK      09.30 Consumer Credit (March)

UK      09.30 Mortgage Applications (March)

EU      10.00 PPI (March)

US      15.00 Factory Orders (March)

US      15.00 Pending Home Sales (March)

The Pound declined against the Dollar while remaining relatively unchanged against the Euro as S&P’s credit rating of Greece and Portugal declined triggering slumps in risk aversion forcing investors into the Dollar.

The Dollar made considerable gains against the Euro and the Pound as the markets largely shrugged off the economic reports released earlier in the session, which included the Case-Shiller home price index, the Conference Board’s consumer confidence survey and the Richmond Fed manufacturing survey. The Case-Shiller home price index fell by more than expected in February – declining by 0.9% versus a 0.4% drop in the previous month. The Conference Board’s consumer confidence survey printed sharply better than forecast, rising in April to 57.9 and outpacing calls for an improvement to 54.2 from 52.5 in March. Meanwhile, the Richmond Fed manufacturing surged with the composite index printing at 30 from 6, manufacturing shipments to 30 from 5 and the services index improving to a reading of 9 versus 0 from March. The main catalyst for Dollar strength was increases in risk evasion due to credit downgrades of Portugal and Greece.

The Euro declined against the Dollar while relatively unchanged against the Pound as rating agency S&P announced to cut credit rating of Greece by 3 notches to BB+ from BBB+ with outlook being ‘negative’. The agency warned that bondholders might recover on average 30-50% of their initial investors should there be a default on debts. Further downgrades cannot be ruled out if upcoming data show that Greece’s ability to repay its debts will materially weaken from current expectations.

A short while before the news about Greece was S&P’s downgrade of Portugal’s rating by 2 notches from A+ to A-. Portugal’s fiscal and economic structural weaknesses are in ‘a comparably weak position to address the significant deterioration in its public finances and expected lacklustre economic growth prospects over the medium term’. Same as Greece, outlook is ‘negative’ as there’s potential for further downgrades if deficits and debt levels exceed current expectations and if consolidation measures are not fully implemented’.

Data released 28th April 2010

US      19.15 FOMC Rate Announcement (April)

This morning’s exchange rates

GBP/EUR 1.1535

GBP/USD 1.5198

EUR/USD 1.3173

GBP/AED 5.582