US employment data spreads nervousness
Sterling hits 3 ½ year high against Euro
China slowdown could weaken Australasian Dollars
FX Market Overview
Oh Andy. So near and yet so far but Wimbledon is over for another year and we did get one British winner in Jonathan Marray. The sheer jubilation in which he and partner Freddie Nielsen celebrated was fantastic. First British men’s champion since 1936 looks great on his CV. So Federer wins his 7th, Serena Williams comes back from major illness to win a 5th title and we got a British winner as well; this has been a classic Wimbledon championship.
There aren’t as many winners in the forex market I am sorry to say but the plucky Brit (Sterling that is) is holding on well. The Pound is being slightly flattered by a very poorly performing euro but you’ve got to be in it to win it as they say on some gambling website somewhere. The Pound hit a 3 1/2 year high against the embattled euro on Friday as the European Central Bank’s interest rate cut was seen as a step in the right direction but not enough. It wasn’t just the ECB though; The fact that the Bank of England added funds to the financial system was seen in positive light; boosting Sterling, and the decision by China to cut interest rates again was seen as a worrying sign for the Asian and Australasian economies, hence the weakness we have seen over the weekend in the Aussie and Kiwi Dollars.
Investors walking away from the Australasian Dollars are clearly seeking more safety and that has shown itself in the strength of the Japanese Yen and US Dollars over the weekend. We would normally see that same sort of safe haven buying of the Euro but that has not transpired.
The International Monetary Fund is so concerned over the Eurozone, Chinese and US data that they are downgrading their global growth forecasts. IMF Chief, Christine Lagarde will announce their new forecasts on 16th July. They will have plenty to contemplate because this is an enormous week for Chinese economic data and China is an enormous piece of the global economic puzzle. China is both a bellwether of demand as Chinese manufactured gods are so prevalent but if China is slowing it is also a bellwether of demand in the economies of its suppliers; the Aussie, Kiwi and Far Eastern economies in particular.
French President Francois Hollande has said that he sees the agreement to align European banking as a first step towards proper financial integration but Finland’s Finance Minister Jutta Urpilainen has said that Finland would not stay a member of the euro “at any cost”. You may remember that last week Finland was questioning whether Euro support funds could legitimately be used to purchase the sovereign debt of failing Eurozone countries. EU Finance Ministers meet in Brussels today to continue discussions over what can be done.
The US Dollar was weakened by the poor employment report released on Friday. The markets had become all aerated after the private payroll report from ADP had been very positive but they were lulled into a false sense of security and the growth in non-farm payrolls as recorded on the official figures was down to 80,000. That was a bit of a reality check for those who had been assuming all would be well in the US. Recent US data has been weakening; a reflection of the slowdown in the economic recovery and the fact that America is part of a global economy which can’t grow if other countries are floundering. The US Dollar remains the safest of safe havens though so if this slowdown gathers pace (an oxymoron perhaps) the US Dollar will strengthen.
As for today, well we get very little data during UK office hours but this evening brings US consumer credit and overnight tonight we will get New Zealand and Australian Business Confidence Indices, a British Retail Consortium sales statistic, a house price index from the RICS and Chinese import and export data. It will be a busy trading session and we can expect a fair amount of volatility before we come in tomorrow morning.
And finally I have the perfect reason not to wash my car (as if I needed one); it’ll make me look wealthier. That’s according to a survey by the AA in conjunction with Populus. Apparently, the wealthier you are, the less likely you are to wash your car every week so I can bluff it. I guess there is a certain point in the wealth at which time you have your driver wash it every day but I am not trying to purport myself as a millionaire so that’s OK isn’t it.