European Tussle Continues

The broadsheets are being very bold in their views on currency movement at present. There is a huge amount of negative data spiralling out of the UK, Europe and the US. With European debt issues making many of the headlines it would be wise to speak to your broker to get a broader view on the overall picture.

Pound Sterling – UK Markets

Like Yellowstone National Park, a report in the UK is set to forecast house prices stagnated in June. Whilst back in May we saw a miniscule increase of 0.1 percent in the price of homes across Britain, June will bring us all crashing back down to earth. If we’ve said it once before, I’m sure it will be said many a time throughout the remainder of 2011 – a large portion of pessimism should be served up with sterling. If we were wondering why we were feeling the pinch in our pockets we now have some idea of the cause. UK retail inflation accelerated last month at the fastest pace since October 2008. Guilty parties appear to include rising commodity costs and a weakening pound. As inflation heavily outpaces wage growth, the governments’ hefty budget cuts will undoubtedly clobber the large majority of us with our own personal cutbacks.

US Dollar – US Markets

The dollar has continued its decline as a crippling jobless rate continues to deter the Federal Reserve from raising rock bottom interest rates. The greenback fell for the seventh time in eight days. What we essentially have now is a dog chasing tail situation with jobless figures expected to continue rising. As long as this occurs the Fed will not tighten the monetary policy. Therefore in essence, the dollar will remain weak until either one breaks the cycle.

Euro – European Markets

Like a child getting bored of their toys, we have now forgotten Greece and been drawn towards issues in Portugal. Following a 78 billion euro aid package that came two months ago, Moody’s Investors Service cut the nations credit rating to Junk. The cut took the nations credit rating from Baa1 to Ba2. On the prospect the package will fail to fix Portugal’s finance issues, euro government bonds were sent tumbling. This news comes as a strong reminder that debt issues do not end with Greece and that contagion is more than likely. Following this, the euro has dropped slightly against the US Dollar. With interest rates decisions set to be released tomorrow the decline could be short lived if, as we expect the ECB may increases the base rate.

Other Currencies – Highlights

Contrary to its US comrades a report due to be released tomorrow is set to show that Australia added the most jobs in three months. Consequently, the Aussie has snapped two-day losses against the US Dollar. Following Moody’s downgrade of Portugal and advancing crude oil prices, Canada’s Dollar has strengthened against 13 of its 16 major counterparts. Underlying commodity movements are helping the Canadian Dollar and have been for quite some time now. Whilst it can be volatile, movements have a positive trend.