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28 Aug 2015

Euro at Loss to Dollar

The Euro fell out of favour with markets yesterday, moving to as low as $1.121 against the Dollar and fell below £0.73 for the Pound sterling. Cable (GBP/USD) also continued to move lower yesterday, spending some time below $1.54. Although, as trading gets underway this morning, it is changing hands back above this level.

 

Turning to the day ahead, there is a busy schedule of data releases on both sides of the Atlantic. The highlights are revised UK Q2 GDP, EC Eurozone sentiment indices for August, preliminary German HICP for August and US personal income/consumption (with core PCE) data for July. However, unless the data provide any surprises, we could see the dollar retaining its firmer tone as we head into the weekend.

 

US Dollar

Yesterday upbeat U.S. data allowed the dollar to recover further the losses suffered on Monday when it opened at EUR/USD of over $1.17. The improved data also bolstered bets that the Federal Reserve would raise interest rate before the end of 2015.

 

Additionally, month-end rebalancing flows are likely to support the dollar, traders said.

 

Today the cable trades at GBP/USD $1.53946. As you can see a considerable drop since the start of the week.

 

Euro

Equities at the start of the week endured an 8% drop, however the majority of this fall has been recovered over the last 72 hours. Markets are beginning to cool slightly in hopes of continued easy central bank policy.

 

Yesterday Bloomberg showed one chart which showed that money supply or bank lending is increasing well above levels during the economy crash of 2008. Fears of a slowdown in global economic growth have sparked big price swings across equities, currencies and commodities this week.

 

This morning the Euro trades at £0.73219 as of 10:30 AM Iris time.

European economic sentiment this month rose to 104.2 from 104 for July. This is a good result as it suggests a continued growing positivity among businesses across the Eurozone. Additionally the Euro group economic sentiment also rose to 107 from 106.6 in July.

 

Pound Sterling

The London FTSE rose 212 points to 6,192 yesterday following the trends of the Dow Jones and German Dax which rose 3.2% respectively. This rise was due to commodities rising in price including a slight rise in oil which would be supportive of the Oil related companies listed on the FTSE such as Royal Dutch Shell, Weir Group, Glencore, BP and Irish company Tullow Oil. The Pound Sterling trades at €1.36553.

An interesting piece of news for the day was a chart depicting the effects on economies such as Germany, Japan, Australia and America if the Chinese slowdown come to an even worse fruition.

 

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