UK Banks In For A Shock

It seems as though the UK banking sector may be in for a shock as Chancellor George Osborne has announced that he is backing proposals which would see retails banks separated from their trading arms. This would mean that should the trading arm come into trouble they would not be able to affect the savings and loans in the retail bank sector. Sterling reached two week highs against the euro yesterday on the back of the continued struggles faced by the single currency nations.

Pound Sterling – UK Markets

Apparently, consumers are putting faith in the UK economy; you may be just as baffled to read that as I was, however that aside, consumer confidence jumped by its highest level in over five years during May. Notwithstanding this caution is advised when interrupting statistics as the increased spending is being accredited to the extra bank holiday for the royal wedding. Economists have been quick to point this out stating that it is far too early to know whether the increased confidence is sustained or simply a short burst. This may already be the case with a key indicator of consumer spending being the claimant count change. Figures for this were released this morning and went against general consensus coming in much worse than expected which implies negative consumer confidence. The direct influence on sterling is yet to be seen but caution is advised so speak to your broker today.

US Dollar – US Markets

The overall cost of living in the US increased at its lowest rate in six months during May as fuel costs waned. The consumer price index rose by 0.1 percent after a leap of 0.4 percent in April. This has come as welcome news to a large proportion of consumers in the US who have been hit with rising costs across the board. However, some may feel that this was a necessary move. On the flip side of this, the dollar weakened against most of its most traded counterparts as retail sales came in less than forecast, though still weak, the retail sales data was not as bad as most had expected.

Euro – European Markets

As anticipated, European officials failed to come to any sort of an agreement over a second Greek rescue package. A day of talks has seen the euro fall against the dollar and sterling and with many concerned over how the debt ridden nation can avoid a default, investors are being urged to sell the single currency. Rating agency Moody’s has placed three French banks under review for a possible downgrade over their exposure to the Greek debt. The euro has depreciated 0.7 percent in the past week against nine of its major counterparts in the developed economies. This has sparked further concern that the single currency may be on the way to a sharp decline. With this in mind, German Chancellor Angela Merkel and French President Nicolas Sarkozy will meet in an attempt to resolve differences as quickly, and as amicably as possible. Sterling reached two week highs against the Euro yesterday enabling clients with market orders to take advantage of the volatility.

Other Currencies – Highlights

The continually soaring Swiss Franc has been the focus of much attention recently and the Swiss National Bank has stated that it may be forced to keep borrowing costs near zero because of the currencies strength. This can be outlined with the basic fact that the safe haven currency has gained 3.5 percent in the past month. Stronger than forecasted data in the US and China has made commodity currencies far more appealing. Due to this the Canadian Dollar has strengthened against the majority of its most traded counterparts.