Eurozone steps back from preferred status on Spanish loans
Sterling weaker on downward GDP revised
Canadian GDP ahead
FX Market Overview
I don't know if you are a tennis fan but it would be worthwhile for everyone to watch yesterday's Nadal v Rosol Wimbledon match on Iplayer or anywhere. I am not an avid tennis buff but I was totally absorbed and thoroughly entertained. For someone ranked No. 100 in the world to beat the number 2 seed in such calm and composed style is amazing. Underdogs rule OK.
Clearly Barclays wasn’t alone in rigging the LIBOR interest rates; that would require a concerted effort by a number of banks so we can expect further fines and more hoo-hah in the days ahead. It’s a shame this was all going on while the UK economy shrank by 0.3% in Q1 and by minus 0.4% in Q4 according to revisions made in the data released yesterday. Sterling slipped for most of the day. Events in Europe still dominate the news though with the agreement that the EU doesn’t have preferred creditor status on the emergency funds released to Spanish banks. That cheered other investors and the Euro had a better day than of late. That was probably only a short term measure though because the EU summit in Brussels is still in session for another day and we haven't a clue how that will pan out. We do know though that the German finance minister has been suggesting the Germans would consider European bonds which is totally contrary to what Chancellor Merkel just a day earlier. So who knows what the day ahead might bring.
The US economic growth data showed an unrevised growth figure of 1.9%. The Dollar was largely unmoved by the number. Whether that improves or reduces the likelihood of further quantitative easing by the Federal Reserve is open to debate and, judging by the lack of US Dollar movement, it’s an unresolved debate at that.
Overnight news that Japanese industrial output shrank at the fastest pace since the 2011 earthquake didn't help the Japanese yen but a weaker yen is on the Bank of Japan's wish list so they won’t be too perturbed by the currency move even if they are by the data.
The Australasian Dollars were buoyed by the agreement on Spanish debt and the rumours about a Eurozone bond for no other reason than the calming nature these events had on investor confidence. I guess there is the knock on effect that if Europe improves, Chinese exports improve and therefore the demand for Australasian raw materials improves but the more immediate effect is that of investor confidence.
This afternoon brings Canadian economic growth data and we think the GDP figure will be revised upward so there is the potential for a stronger Canadian Dollar going into the weekend. CAD buyers may want to act early in the day.
And if the EU summit wasn’t enough to contend with, please be aware that this is the last working day of the week, month, quarter and half year periods so the volume being put through the market will be enhanced and the volume of settlements will be too. So volatility may be up which is a good thing but bank payments systems will be inundated to please arrange to settle your funds early in the day to avoid any last minute hitches.
And finally, can you really see formula one coming to the streets of London? Surely the health and safety brigade would be insisting on speed humps to keep things safe. And F1 might be a wealthy sport but even they couldn’t afford the congestion charges for all their vehicles. Nah. not gonna happen.