The World Continues to Stress

With relatively little good news coming out of the markets the world remains focused over the effects tomorrow’s stress tests will have on the economy. If you are sitting on a potential transfer, split over a ‘do I, don’t I’ decision, find peace of mind by speaking to your personal broker at Currency Solutions.

Pound Sterling – UK Markets

With the World Cup having been and gone the general public will undoubtedly refrain from spending much time speaking about the quality (or lack of) of the national side’s football team. However, with June retail sales being published today, the largest global tournament pushed figures up 0.7% as electrical goods shops and department stores were part of a small minority to see the silver lining in the clouds. This coupled with a fall in unemployment over the three months through May saw the economic recovery gather some form of momentum. The GBP/EUR rate at GMT 11:10 was 1.1906 and the GBP/USD rate was 1.5275.

US Dollar – US Markets

The Dollar has fallen today as initial jobless claims rose and existing home sales fell. This data has done little to calm concerns that the US economic recovery is slowing and further underpins the volatility in markets at this current moment in time. These figures were reflected in the Dollar index which ended three consecutive days of gains, falling 0.3% to 83.12 against the six currencies it is compared against. With little data expected for the rest of the week, the Dollar has little chance of claiming any losses back. Tough, dark times are expected in the near future for a currency that only three months ago was considered a ‘safe haven’ for investors.

Euro – European Markets

Following on from yesterday’s concerns, perhaps it is time we look in further detail at the stress tests and what credibility they hold in the grand scheme of things. Back in 2009 America performed public stress tests which helped bring an end to the turmoil on Wall Street. So, whilst some would like to see the 91 banks pass the upcoming European stress tests with flying colours, this from an investor’s point of view would be a complete failure. With no single body taking charge of the tests, there are fears that bickering from within could compromise the validity of the results. Therefore, when we finally know the outcome on July 23rd let’s hope that the questions asked were tough enough and that they were regulated as tightly as those in America. The last thing anyone wants is unexpected sovereign defaults down the line. Currency markets are walking on a tight rope and those involved in the Euro should think long and hard as to how results tomorrow will affect the single currency which at GMT 11:00 stood at a market rate of 1.2830 against the USD.

Other Currencies – Highlights

With the Dollar falling today, concerns over the strengthening Yen and its affect over exports is growing. Investors have taken refuge in the Japanese currency on the back of poor US data and concerns over upcoming stress tests in Europe. This has caused Japanese officials to step up their concerns as a rise in the Yen risks a downturn in exports and continues the gain of 8 percent on the Dollar and 12 percent on the Euro over the past three months. The Australian and New Zealand Dollar both fell for a second consecutive day against the Yen. With confidence falling on all fronts and with speculation growing that next week’s data will show that inflation is speeding up, the RBA will be under pressure to continue increasing interest rates. For a live quote or to tell us about your foreign exchange requirements, please call us on +44 (0)20 7740 0000.