Market Commentary
Key Themes
The main themes deciding market direction currently are: -
Signs of stabilisation in the US housing and labour markets and positive economic reports elsewhere add to the bullish mood.
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
Deloitte’s latest review says that the economy will grow 0.5% next year and 1.5% in 2011 hinting that the UK recovery will be ‘U’ shaped at best.
Economists warn that quantative easing has only one week left to run as the process has already passed £120bn and is now nearing the MPC’s target figure of £125bn.
UK output shrank 0.8pc between April and June – far worse than the average 0.3pc slump predicted by City economists. All parts of the economy – apart from the public sector – are now in recession.
Monday Technical Trading
GBPUSD – A week of tight range trading being driven on a temporary basis by the daily news and data. Now waiting for a break above 1.6550 or below 1.6350
EURGBP – EUR is still continuing to strengthen against GBP in the longer term and is now holding above 0.8600
GBPCHF – Finished firmly in the middle of the weekly range at 1.7600 area. Looking for a break above 1.7750 or below 1.7450
GBPJPY – Traded higher on the week on the back of JPY weakness. Holding above 156.00 will signal a move higher.
EURUSD – After a volatile week with no clear direction the pair finished trading firmly in the middle of the weeks range at 1.4200
Data released today
Monday 27th July
3.00pm USD New Home Sales
Measures - Annualized number of new single-family homes that were sold during the previous month
Why Note - It’s a leading indicator of economic health because the sale of a new home triggers a wide-reaching ripple effect.
Usual Effect - If the actual number is higher than forecast then this is seen as good sign for USD
Market Sentiment and Consensus
EURUSD
This week – expected higher as long as it doesn’t trade below 1.4056
GBPUSD
This week – expected higher as long as it doesn’t trade below 1.6263
EURGBP
This week – expected higher as long as it doesn’t trade below 0.8572
