Markets wary of risk
Pound Sterling - UK Markets
The pound is trading in familiar ranges against its international currency partners this morning, currently valued at 1.51 against the US dollar and 1.12 against the euro. Sterling has declined over 2.5% against the Indian rupee which surged on the back of election results and also weakened against the New Zealand, Australian and Canadian dollars.
Weaker than expected growth figures from the eurozone saw the pound strengthen against the euro on Friday on the view that the eurozone economy is in worse shape than the UK. This morning Sir Victor Blank has announced he will step down as chairman of Lloyds in June 2010. Major shareholders lost confidence in the chairman after Lloyds was crippled by the acquisition of debt-ridden HBOS late last year. The UK Treasury currently owns a 43% stake in the bank. Lloyd's shares have climbed this morning on the back of the announcement. There is no major data out in the UK today with the consumer price index for April released tomorrow.
US Dollar - US Markets
The dollar is broadly stronger against the euro and yen this morning as equity and foreign exchange markets enter consolidation mode in the absence of any positive market data. The dollar has also lost ground against its UK, Australian and New Zealand counterparts.
The dollar dipped to a fresh two-month low against the yen overnight as soft US retail sales figures last week put a dampener on risk appetite. The trend in equities remains one of consolidation with oil trading at USD57 a barrel. Recovery in the global economy is expected to spring from improved consumer demand from India and China with this leading to an improvement in US export figures. US treasury secretary Geithner is to speak today and this could be a source of strength for the US dollar.
Euro - European Markets
The euro is correcting against the dollar this morning after last weeks highs, currently trading back in the vicinity of 1.34. The euro is also weaker against its international currency partners, trading lower against the pound, yen and dollar currencies this morning.
The euro surged against the US dollar last week on the back of improved confidence in the global economy. However, this bullish run was broken by the release of first quarter GDP statistics on Friday which showed a -2.5% contraction in the eurozone economy. Individual nations experienced much larger declines and this led the euro to weaken against the pound and dollar. Germany's economy contracted 3.8% in the first quarter while Slovakia, the newest member of the euro-zone, experienced an 11.2% decline. This morning, ECB member Axel Weber warned against 'exaggerations' of economic recovery and this is weighing on the euro. The German ZEW economic survey is out tomorrow.
Other Currencies - Highlights
The New Zealand dollar remains weak this morning as official statistics show the service sector PMI fell from 47.1 to 43.7. The producer price index output has also fallen by -1.4% in the first quarter and the New Zealand dollar remains battered by the rise and fall in risk appetite internationally.
Stock markets and currency exchange rates in India have surged after a decisive win for the Congress Party. This provides a mandate for the government to continue the reforms which have led to a surge in Indian growth rates in recent years. The Indian rupee climbed its most in two decades, forcing the Bombay Stock exchange to close for a day and the stock index gained 17%.