Trichet Under Siege

As expected, the Eurozone is stealing the headlines today. European Central Bank President Jean-Claude Trichet has come under fire as he faces a double barrelled war. He has the on-going Greek debt crisis which is threatening to cripple the Eurozone. Whilst on the other hand the ECB is attempting to control price pressures. In the past the ECB has supported lenders with cash stimulus. However, Trichet now feels that it is up to the various nations to plug the overall budget gaps.

Pound Sterling – UK Markets

Unsurprisingly, sterling took a beating against all 16 of its major counterparts overnight before the Bank of England announces interest rates today at GMT 12:00. The only saving grace is that industrial production rebounded in May after heavily contracting in April. However, whilst I feel like a broken record stating this again it is my duty to report that the BoE is likely to hold interest rates unchanged at a record low of 0.5 per cent. Therefore, with interest rates in Europe expected to increase, sterling may come under a little more pressure later on today.

US Dollar – US Markets

The US economy faces a crucial couple of days so far as key data is concerned. Whilst lingering debt concerns continue to cripple the world’s largest economy, a real indicator of performance will be released later today. Jobless claims, an on-going indicator of levels of unemployment which are currently keeping interest rates near zero are expected to show slightly improved figures. Furthermore, non-farm payrolls, which have previously caused dramatic movements in the foreign exchange markets, are set to be released tomorrow. With figures expected to be much improved, a below par reading will be seen as being detrimental to the already under fire US Dollar. On the other hand, a positive reading should boost the dollar slightly.

Euro – European Markets

There has been speculation in the markets that Greece, whilst receiving a recent bailout package may be facing an inevitable default. This in itself would be detrimental to the euro project. However, it is now being suggested that Greek creditors may be willing to risk a more controlled, planned default to finally resolve the nation’s debt crisis. Essentially, although Greece has received the bailout it so desperately needed, investors remain cautious, especially following yesterday’s downgrade of Portugal. The euro rallied against the majority of its 16 major counterparts amid what now appears certain, speculation that the ECB will signal a further quarter per cent rate rise later today. The single currency snapped two days of declines in what is currently a very sensitive market environment. Remember, as a Currency Solutions client you have access to a broker who constantly monitors rates on your behalf so feel free to call in for a live update.

Other Currencies – Highlights

Clarifying yesterday’s speculation, the Australian Dollar rose for the second consecutive day as employers added more jobs in June than economists initially forecast. This has momentarily eased previous concerns that the nation’s economy had been losing momentum. Subsequently, the Aussie strengthened against all 16 of its major counterparts. There have been more signs that companies are increasing spending to restore businesses and production in Japan following the devastating earthquake and tsunami on March 11. The nation reported that machinery orders rose at the fastest pace in four months, increasing by 3 per cent in May from April. Whilst the recovery has been slow, experts are predicting company profits will recover later in the year.