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

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 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 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 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

The Dollar declined against the Euro and the Pound yesterday as investors raised their appetite for risk amid an improving outlook for future economic growth. As risk trends continue to have an impact on the currency market, positive economic developments in the US could encourage an improved outlook for global growth and lead market participants to seek higher yielding investments. However, the correlation between the USD and risk is likely to deviate over the near-term as the Fed aims to normalize its monetary policy this year.

The world’s reserve currency is also likely to face increased volatility throughout this week as an economic docket chock-full of key inflation, retail sales, and manufacturing data, is expected to reinforce the nascent recovery of the world’s largest economy. A steady stream of mostly sanguine economic data last week helped to bolster investor confidence lending credence to the notion that the worst is well behind.

The Euro made gains against Pound and the Dollar buoyed by optimism following the announcement of an aid package for Greece that lifted the single currency. The euro broke from its recent ranges following the announcement of the multi-party deal. In a coordinated effort, Eurozone countries pledged EUR 30B in aid to Greece with the IMF also expected to contribute another EUR 10B. The news came as welcome relief for the E-16, which has shown progressing improvement from its economic slump. Last week saw the Region’s PMI make further inroads to 55.9.

Data released 13th April 2010

UK      09.30 DCLG House Prices (February)

UK      09.30 Trade Balance (February)

Non EU Trade

US      13.30 Export Prices (March)

Import Prices

US      13.30 International Trade Balance (February)

GBP/USD CHART

A very interesting couple of days trading since our last chart shows that we indeed had a good look at the market on the support levels at 1.4852 and 1.4781, the latter really not being tested at all. We are now trading back into the belly of our range and are looking for direction regarding our next move. I still feel that in the run up to our election and the uncertainty surrounding the outcome, that sterling could be put under pressure and a retest of the support levels is inevitable, only a close above our resistance level at 1.5349 would indicate a reversal of the current trend.

Disclaimer

The above details are only the authors own opinion. Markets can be very volatile and prices will fluctuate as a result. Any decision to buy or sell currency is purely at your own discretion.

The Dollar made gains against the Euro while declining against the Pound as global stocks rose and oil traded near the highest level in more than a week increasing risk appetite. Although markets showed little reaction to data ,which showed that prices for US single family homes rose for the eighth straight month in January, the release of US consumer confidence data boosted optimism in the market. Confidence among US consumers climbed in March as Americans perceived that employment was starting to improve. The Conference Board’s confidence index rose to 52.5, exceeding the median forecast of 46.4 in February.

The Euro declined against the Pound and the Dollar after data showed that US consumers were feeling more confident about the future in March, giving a slight boost to investor risk sentiment. The single currency also hit a two-month high against the yen on relief that Greece was able to raise funds from the market, though gains were quickly trimmed as wider euro zone fiscal concerns weighed on sentiment. The euro should continue to trade with a limited upside potential given that the euro zone’s debt problems and weak growth mean the European Central Bank is in no rush to hike interest rates.

Data released 31st March 2010

EU      10.00 Flash HICP (March)

EU      10.00 Unemployment (February)

US      13.15 ADP Employment (March)

US      14.45 Chicago PMI (March)

US      15.00 Factory Orders (February)

Exchange rates

GBP/EUR 1.1233

GBP/USD 1.5096

EUR/USD 1.3438

GBP/AED 5.5460

Chancellor of the Exchequer Darling last week reported his latest economic growth forecast is “in line with the Bank of England forecast.”  Darling said he plans to “reduce borrowing further” and reduced his budget deficit forecast for the next five fiscal years by £44 billion.  On the whole, Darling’s fiscal report was more proactive than expected about addressing the U.K.’s fiscal problems.  The U.K.’s 2009-2010 budget deficit is expected to total around £167 billion and be slightly less in the 2010-2011 fiscal year.

The Dollar declined against the Euro and the Pound on Friday as US GDP growth was revised down from 5.9% to 5.6% annualised in Q4 and US UoM consumer sentiment was revised higher in March. The modest upward revision to UoM consumer sentiment from 72.5 to 73.6 leaves the index unchanged from February.

The Euro made gains against the Pound and the Dollar on comments by ECB’s president Trichet at a late Thursday’s news conference in Europe, where he denied criticizing the inclusion of IMF finance in any rescue package and stated that he was ‘extraordinarily happy that the governments of the euro area found out a workable solution.

Data released 29^th March 2010

UK      09.30 Consumer Credit (February)

UK      09.30 Mortgage Applications (February)

EU      10.00 EC Business Climate (March)

EU      10.00 EC Economic Sentiment (March)

Consumer / Industrial / Services

US      13.30 Personal Income / Consumption (February) +

Core PCE

AUD/USD CHART

The above market has traded sideways for a six month period and as we know this is in a very long term uptrend and we could well be getting ready for the next move up. We would have to take out the 0.9056 level first which has been strong resistance lately and then attack the 0.9334 level which would leave the highs exposed, we need to be trading under the 0.8806 level of support to suggest the long term uptrend has been broken. We have to stay with the trend in place so would look to see the market trade to the upside.

Disclaimer

The above details are only the authors own opinion. Markets can be very volatile and prices will fluctuate as a result. Any decision to buy or sell currency is purely at your own discretion.