A Default Is A Likely Conclusion

Whilst Greece remains firmly in talks over the bailout package, it has been suggested that rather than trying to prevent a default, the ECB may in fact be delaying one in an attempt to best prepare for the inevitable. Whilst this could be market skepticism it makes for interesting reading and the pieces do seem to fit. Come late June we will have a better understanding as to what the likely future of the euro has in store for us.

Pound Sterling – UK Markets

Whilst the press is making big news over retail sales falling by 1.4 percent in May, the fact that markets held relatively firm throughout yesterday reiterated the truth that the fall was more or less expected. The royal wedding provided some necessary stimulus in the market but it was always going to be temporary and the hangover from this was always going to be hard to judge. Therefore, the figures coming in worse than expected yesterday came as little surprise to the foreign exchange markets and the overall value of sterling. Although there were losses through the day, the majority of these appear to have been anticipated however, with food and fuel now accounting for more than half our spending, consumers overall concern over the economic climate and job uncertainty tainted these figures following the wedding stimulus.

US Dollar – US Markets

Leading US economic indicators have rebounded in May after declining for the first time in almost a year. This can be seen a positive sign that growth may pick up by the end of 2011. As supply chains from Japan continue to ease, manufacturing and the rest of the economy may come to benefit in coming months with a combination of factors including cheaper fuel prices. This initial forecast is expected to be clarified later today by leading economists. At GMT 15:00 the US leading indicator report is being announced, seven of the ten indicators which are known ahead of time include stock prices, jobless claims, building permits, consumer expectations, the yield curve, factory hours and supplier delivery times. All have which will have been taken into account when figures are adjusted. On the back of more positive growth prospects, the US Dollar strengthened yesterday against a number of major counterparts including sterling and the euro.

Euro – European Markets

Talks with Greece have continued today and murmurs of a default have started trickling through the markets. Furthermore, there is now growing concern that a default risks spreading through other countries in the Eurozone. The single currency consequently fell for the third consecutive day versus the yen and the US Dollar, and is now hurtling towards a second weekly drop against the greenback. However, as of GMT 10:00 this morning the European Monetary Union announced that trade balance figures had come in higher than expected outlining an overall trade surplus. This has had very little direct impact on the economy and many believe that the only factor that will have a dramatic effect on the markets will be an extension of Greek woes.

Other Currencies – Highlights

Japans recent earthquake and tsunami has single handedly plunged the nation back into recession. The government is set to increase taxes and make heavy restrictions on consumers throughout the summer months in an attempt to drum up some of the funds necessary to reduce debt. However, on a more positive note, Toyota has announced that manufacturing is gathering pace quicker than expected and this has also been reflected in US import figures. As one of the few forex brokers in the UK to actively trade the Brazilian Real we have been watching the South American markets like a hawk. The central bank has said it will continue with its strategy of raising interest rates for the foreseeable future as the country’s inflation outlook shows sings of continual improvement. This move is likely to see the local currency increase in strength over the coming months.