Currency traders aloud some peace
There was some improvement in risk appetite yesterday. Signs of stabilisation in the Chinese currency and a press briefing from the country’s Central Bank helped to ease market concerns regarding a prolonged period of devaluation by the Chinese authorities
In level terms, EUR/USD has spent much of the last 24 hours trading in a tight range just above $1.11. It has been a similar story for EUR/GBP with the pair trading in a 71-71.5p range. Elsewhere, the GBP/USD continued to trade around the $1.56 mark.
Dollar
The dollar was helped by the reduced turbulence in Chinese FX markets, which some speculated could have delayed Fed tightening. The currency was also supported by a better than expected print from the July retail sales data. Meanwhile, the improved risk environment meant the euro struggled to build on its recent ‘risk averse’ gains.
From a dollar perspective, both industrial output (July) and consumer sentiment (Aug) are forecast to register improvement. So, at the margin, given the data dependency of Fed tightening, such outcomes could be supportive to the dollar heading into the weekend.
Current the Dollar trades at USD/GBP - £0.64077.
Euro
The focus this morning will be on the Eurozone with the first estimate of Q2 GDP due. Market expectations are for growth to have remained at 0.4% for a third straight quarter.
Already this morning, we have had Q2 GDP numbers from France and Germany and both disappointed versus market expectations. Therefore, the risks to the Eurozone number are to the downside and this could act as a headwind to the euro today.
Currently the Euro trades at EUR/GBP - £0.71408.
Greece
Support from pro-euro opposition parties allowed the 85 billion euro ($95 billion) bailout program to pass with 222 votes in the 300-seat chamber. Tsipras will call a confidence vote in parliament after Greece makes a debt payment to the ECB on Aug.20, a government official said.
Recently Alexis Tsipras defended his decision to proceed with the Greek bailout by stating;
"I do not regret my decision to compromise, We are not exulting but we are also not mourning over this difficult agreement. I have my conscience clear that it is the best we could achieve under the current balance of power in Europe, under conditions of economic and financial asphyxiation imposed upon us."
Pound Sterling
Currently the pound trades at GBP/USD - $1.56054 and GBP/EUR – €1.40017. An article from today has found that new data released from the Office of National Statistics (ONS) has released revised GDP figures which shows that the UK is keeping pace with the recovery experienced in the USA. The latest data from the ONS shows that the UK economy was 2.6% larger in the second quarter (April to June) in 2015.
On a jobs front, the UK is doing astonishing as out of the 31.03 million people in work, 22.76 million people are working full-time, 352,000 more than for a year earlier. If this data maintains it course for the remaining months of 2015, a rate increase from the Bank of England will be very likely in early 2016.
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