UK on hold in expectation of interest rates meeting

A quiet week so far with regards to data releases continues today with focus shifting back to the Eurozone banks. As Spain gets ready to take on the Germans this evening in a Eurozone semi-final crunch match, investors on the continent appear to be placing their bets firmly on Spain as renewed confidence flows through the nation. Will the bets be as safe this evening or will German Chancellor, Angela Merkel once again put on her dancing shoes in the stands?

Pound Sterling – UK Markets

At GMT 10.45 the GBP/EUR rate was 1.2018 whilst the GBP/USD rate stood at 1.5099. With very little data coming out of the UK today in anticipation of the Monetary Policy Committee (MPC) meeting tomorrow, once again the UK is nervous as to what the outcome of the interest rates talks will be. Many expect that the rate is unlikely to move away from 0.5% and a change from this would catch the market off guard. Your Broker at Currency Solutions will be able to advise you further on the current position of the Pound and with big decisions due to take place, now is the time to get further information.

US Dollar – US Markets

As a continuation of yesterday’s concerns, ISM non-manufacturing data for June fell to 53.8. This was a staggering 1.2 lower than the original suggestion of 55 that was predicted. Furthermore, the employment aspect of the index fell below the benchmark level of 50 to 49.7. So, whilst there was very little data being extracted from the US over the past few days, fears that the economic recovery may be slowing are indeed coming to light. This was reiterated in the currency markets where the US Dollar fell to its lowest levels since May against a basket of key currencies. However, with little data expected to emerge out of both the UK and the US today it is likely that focus will turn to the Eurozone.

Euro – European Markets

At GMT 10.45 the EUR/USD rate was 1.2563. Positive sentiment has continued in European markets this morning on the back of renewed optimism on the continent. The latest figures show that Greece’s fiscal plan is on track whilst Spain’s 10 year bond issue, as mentioned yesterday attracted a relative amount of interest from investors. Furthermore, there has been a positive view taken by experts on the upcoming “stress tests” due to be undertaken by a number of Eurozone banks. Pressure from Spanish banks on the rest of the Eurozone to publish “stress tests” later this month has been the main cause of renewed confidence. However, something that is often left unsaid is the fact that Spain’s debt problems are not as severe as Greece because the GDP is relatively low. Therefore, the proposition of high yields has been increasingly attractive to investors. With German factory orders for May being released today there is an expectation that the weaker Euro will show support for the export industry.

Other Currencies – Highlights

Although the Australian Dollar (AUD) fell today against 15 of its 16 major counterparts as the global economic recovery showed signs of slowing, sentiment towards the currency is still strong after renewed optimism yesterday. The Royal Bank of Australia (RBA) produced positive data showing that even though commodity prices had declined; those most important to the Australian economy remain very high. This has seen a surge in terms of trade to the peak levels seen in 2008. Other commodity based currencies also pushed higher with both the Canadian and New Zealand Dollars seeing increases of 0.7% and 0.5% respectively against the US Dollar yesterday. With further employment figures set to be released in Australia tomorrow now really is the time to keep a watchful eye on the AUD rates.