Market Commentary 21/07/09
Key Themes
The main themes deciding market direction currently are: -
The continuing strength of equities. This has stemmed demand for the USD.
China holding record reserves of USD. Could lead to USD weakening as China seeks to balance its foreign currency reserves.
Ongoing concerns over the UK economy and the government handling of it. This is leading to market concerns that there may be a sterling crisis ahead.
In the News
Yesterday saw a continuation of movement away from the USD with the dollar posting a six week low against the EUR. The commodity currencies of AUD and CAD were once again the strongest as the appetite for risk continued its theme. There appear to be some genuine concerns for the health of sterling being expressed.
Speaking in the Telegraph, Neil Woodford, the head of Investment at Invesco Perpetual said, “With the issues that combined to create the current severe recession unresolved, I do not believe that the ingredients are in place for recovery to begin. In addition to the structural problems in the financial sector, the rebuilding of personal and corporate balance sheets has yet to begin in any meaningful way and having been out of balance for so long, this too will be a drawn out process.”
Monday Technical Trading
GBPUSD – Continued to climb against the USD on the back of Dollar weakness. Posting a high of 1.6556. It would appear likely that we would now have a move back down away from the top of this recent range
EURGBP – GBP strengthened against the EUR yesterday however only back down as far as the 0.8600 support and now appears the EUR would continue higher.
GBPCHF – Moved higher but is now beginning to retreat again
GBPJPY – Moved higher to 156.40 but is now retreating again.
EURUSD – Posted a six week high at and is now holding above the 1.4200 area
Data released today
Tuesday 21st July
3.00 pm USD Fed Reserve Chairman Testifies
Usual Effect - If views expressed are more hawkish than expected this is seen as a good for USD
Market Sentiment and Consensus
EURUSD
This week – expected higher as long as it doesn’t trade below 1.3963
Today – expected to trade in the range of 1.4145 to 1.4250
GBPUSD
This week – expected flat in the range of 1.6222 to 1.6481.
Today – expected lower as long as it doesn’t trade above 1.6560
EURGBP
This week – expected higher as long as it doesn’t trade below 0.8535
Today – expected higher as long as it doesn’t trade below 0.8576
