Market Commentary – 30/07/09
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.
- Investor confidence still improving with renewed risk appetite causing further flows out of USD (this was, however, slightly contradicted by Tuesdays weaker than expected consumer confidence figures out of the UK and US which prompted a move back into US bonds and strengthened the Dollar).
- 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.
What Happened Yesterday:
- Mortgage approvals for house purchases in the UK hit their highest level in more than a year in June, although total consumer lending rose by the smallest amount on record.
- Orders for US durable goods fell more than forecast in June, the first decrease in 3 months. Excluding transport figures, however, demand for goods unexpectedly rose signalling manufacturing may expand in the second half of the year.
- Consumer prices in Germany posted their first annual decline in more than 22 years in July, with energy and food prices falling and the recession curbing spending.
- EURGBP broke out of it’s recent trading range and below the pschological 0.8600 level
- GBPUSD fell to around 1.6343 before posting gains in early Thursday trading
What to watch for today:
- Sterling strength off the back of positive housing data released this morning. The Nationwide survey showed house prices have risen for the thrid consecutive month and the Pound has been strong in early trading.
- EURGBP has broken out of its weekly range, and could fall further to 0.8535, 0.8509 and then 0.8400
- US unemployment claims released at 13.30 as it is seen as an important indicator of the economies overall health and correlates with consumer spending.
- GBPUSD has already broken through early technical levels and continues to strengthen
Market Sentiment and Consensus
EURUSD
Today –Flat, in the range of 1.4005 to 1.4109.
This week – Cautious buy above 1.4056 to 1.4291 and 1.4338
GBPUSD
Today – Already broken through the initial ‘flat’ call, buoyed by Nationwide housing data. Now seen a buy, citing 1.6513 and 1.6559
This week – cautious buy if it remains above 1.6263 to 1.6588
EURGBP
Today – Cautious sell to 0.8509 after it has moved below the initial support in early trading.
This week – cautious buy whilst above 0.8572 to 0.8694 and 0.8756. Sell whilst below 0.8572 to 0.8509.
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