Date: Tuesday 13 Jul 2010
The pound had a bit of a choppy ride yesterday after worse than expected current account data saw the pound weaken in the morning before recovering in the afternoon when ratings agency Standard and Poors waded in saying that while the UK had preserved its triple AAA rating for now it was still on negative watch due to concerns that future growth projections were too optimistic, and that political risks could prejudice the plans to cut back on spending in the short and medium term.The economic data keeps on coming for the pound today with the release of inflation data for the month of June. Coming as it does against a backdrop of recent weak data; any further weakness is likely to pressure the pound even further.
This data is expected to reinforce the Bank of England’s often repeated view that consumer price inflation is starting to moderate, falling to 3.2%, from 3.4%, year on year and translate into lower inflation by year end. The month on month figure is expected to come in flat at 0.0%.
However, of the two inflation measures, the main focus will be on the retail price index which has been the more stubbornly sticky of the two, where economists expect the index to fall under the psychologically important year on year 5% level for the first time in 3 months, from the May figure of 5.1%. The month on month figure is expected to slip to 0.1% from May’s 0.4%.
If this proves to be the case then Andrew Sentance the one committee member to vote for a rate hike in May could well be proved to be premature in his desire to raise rates.
In the US the May trade balance figures are due out with a deficit of $39.2bn expected as the recent strength of the US dollar hits the value of American exports.
In Asia today concern about China’s property market saw risk appetite slip back and equity markets decline after the Chinese government reaffirmed an earlier commitment to curb its runaway property prices, as it seeks to normalise its monetary policy in order to stabilise and smooth out economic growth.EURUSD – the down trend line from the 1.5142 highs in December last year, has continued to contain the recent rally in the single currency. This resistance level now sits around the 1.2700 area. A break of last week’s highs as well as 1.2750 would target a move towards 1.3000.
The current stretched momentum has seen the euro drift back towards the support around 1.2550, a break of which would re-target last weeks lows around 1.2480. To continue the upward momentum of recent days these lower support levels need to hold to push above last weeks highs.
GBPUSD – yesterday’s poor current account data has kept a lid on the pound and it has yet to break back above the 1.5080 level, its previous support level. While below the 1.5080/90 resistance area pressure will continue to build up on the downside.
While this is the case we could well see a retest of yesterday’s lows at 1.4950 on the way to target a test towards the 1.4850/80 area.
Above 1.5080/90 re-targets 1.5230/50.
EURGBP – a brief spill over to 0.8420 yesterday ultimately proved unsustainable as the single currency slipped quickly back below 0.8400, posting a low of 0.8340 before rebounding.
While the euro continues to hold below the old June 2009 lows around 0.8400, then the bearish scenario remains intact but only just at the moment. The euro should find support around the 0.8320/30 area.
USDJPY - stuck in a range between support around 88.00 and yesterday’s highs around 89.15/20 the recent political instability won’t help the yens cause. The risk remains for yen weakness and a re-test towards 89.20, a break of which would re-target the 90.00 area. A drop back below the 88.00 level would re-target the downside risk of a move back towards 86.80.
No comments:
Post a Comment