Euro improves on data

This Week's Highlights

Aussie Dollar stronger on employment report

Euro improves on data

FX Market Overview

That was the first time in my life I have ever had to queue to vote. One village polling station is the only thing I have to go on so it is hardly a scientific survey but it would suggest a high turnout for today's General Election. To those of you whose children are at home while their schools are turned into Polling Stations, don't worry; kids TV isn't as bad as you might imagine. (It is but I am trying to make you feel a bit better).

We start the day with a strengthening Australian Dollar after Aussie employment data was in line with expectations. The interest rate cut we saw earlier in the week was partly in response to weakening labour market conditions so the fact that the unemployment rate only rose to 6.2% was a bit of a relief for traders in an awkward 'not so bad news being good news' kind of a way.

We have also already had improvements in German factory orders and Eurozone retail sales. That has given the euro a bit of a fillip and it has strengthened against the Pound which is, as you might expect, a tad weak in light of the uncertainty over the outcome of the UK election. The other Europe story, namely Greece, is still stuttering on as Greece makes an interest payment to the IMF but is still not guarantees any flexibility by the EU and EC or 'Germany' for want of a better expression.

US traders are likely to keep quiet until tomorrow's US employment report. There is a strong suspicion we will get another fall in the US unemployment rate and growth of 250,000 new jobs as well. The US Dollar is poised to strengthen if all of that is true-ish.

Away from the markets I couldn't help but laugh about the Japanese Zoo which has had to change the name of their new baby Macaque. In a public vote the new baby at Takasakiyama Natural Zoological Gardens was named Charlotte. That is perhaps unsurprising; the votes were counted a few days after the naming of the ne Princess in Britain. However, the public outcry at the naming of a primate after a Royal Princess has forced them to rethink. I've got a dog called Harry; do you think I should rename him so as not to insult the new Princess's uncle?

Currency - GBP/Australian Dollar

With a drop in interest rates and a slight improvement in the unemployment rate, the scene is set for some level of recovery in Australia. However, the Sterling – Australian Dollar exchange rate isn't likely to rally until either we get another rate cut from the Reserve Bank of Australia (highly likely by the way) or the UK election returns a solid majority for one party or another (not so likely). The wrangling which will follow a hung parliament is likely to weaken the pound in the short term but the overall strength in the UK economy – relative to others – ought to send Sterling on the right trajectory once the dust has settled. There sis solid support for the Pound at A$1.90 and A$1.87 and a break above A$1.93 would herald another rally.

Currency - GBP/Canadian Dollar

For the last two years the Sterling – Canadian Dollar exchange rate has been moving in a narrowing but upward trend pattern. We are currently witnessing support levels at C$1.82 and that support line has been tested on a dozen occasions and it has held firm on each. Assuming it holds again, and once the UK election is a fond-ish memory, we ought to see another push towards the C$1.94 channel top. Of course a disastrous mish-mash coalition would damage the Pound but only unscrupulous Sterling buyers are wishing that on the UK public. Shame on you. We will have a much better handle on all of this by noon on 8th May.

Currency - GBP/Euro

It is inevitable that the Pound will suffer during a tight election campaign and that is precisely what we have seen. A slowdown in retail activity and an absence of inflationary pressure also have something to do with investor apathy towards the pound right now but Sterling hasn't collapsed and that bodes well for the aftermath of the election count. Assuming we don’t have an SNP, Green Party, UKIP coalition, the markets are likely to welcome an end to the electioneering and some sense of certainty for the next 5 years – always assuming we don't have to have another vote. Support for the Pound can be found at €1.3350 and at €1.3130. A bounce might take us back up to €1.3850 without too much effort. The fly in the ointment could be the resolution of the Greek crisis but let's not pin our hopes on that being resolved quickly.

Currency - GBP/New Zealand Dollar

Hints of NZ interest rate cuts and a smattering of downbeat NZ data have weakened the New Zealand Dollar. So whilst the Pound is losing ground elsewhere, it has in fact gained ground against the Kiwi Dollar. That bodes well for the post-election period and, barring political stalemate, we ought to see another test of the channel top at NZ$2.08. That view would change if the Pound slipped back below NZ$2.00 again but for now, things look to be in an upward trajectory.

Currency - GBP/US Dollar

This chart of the GBPUSD rate is very interesting...honest. The break out to the upside we saw at the end of April has resulted in what is known as a confirmation of the break. Sorry to get technical but when the pound dipped to $1.51 and bounced again, it set itself up for a more substantial rally. As long as the UK election doesn't produce a stalemate scenario, Sterling ought to be testing $1.55 within a matter of days. Obviously the opposite is also true; a dreadful messy coalition or a minority government could undo all the Pound's good work but the upward momentum in the value of the pound will take some stopping.