US retail sales disappoint as riskier as market awaits Greek elections

Tom Tong14/Jun/2012Currency Updates

GBP

Sterling dipped against the euro on Wednesday as safe haven flows into the UK currency eased. There was also a sense of vulnerability for Sterling against the dollar as investors awaited the outcome of Greek elections on the weekend. Sterling fell 0.2 and 0.3 percent against the dollar and euro respectively yesterday. With everything hinging on this weekend’s events, Sterling is seen as a safe haven for euro area capital flows and so is likely to do relatively better than other European currencies. However, due to it’s close tie’s with Europe there is a high possibility it will weaken against the dollar and yen, furthermore anticipation of more QE by BoE later this year may mean Sterling will susceptible to further falls especially against the dollar.

EUR

With Spanish and Italians yields edging ever closer to the terminal 7% marker, it’s very evident that the market is still not convinced that the problems within the Eurozone are moving nearer a positive conclusion. In a now familiar release Moody’s slashed Spain and Cyprus’s ratings which are both seemingly one negative piece of news away from junk status.

Despite the ongoing saga,in the short-term, with the increasing possibility of QE3 in the US and the possibility of a further round of gilt purchases in the UK as early as next month, investors are struggling to find a place to hold funds safely. As a result we saw gains for the euro against the dollar and against the pound yesterday as markets continued to mull over the impact of the Spanish banking bail out and looked to hedge positions prior to the crucial Greek election over the weekend. Today we have second tier data out, such as German WPI and a CPI reading across the board.

USD

Signs of recovery in the US economy took a hit yesterday as US retail sales figures fell for a second consecutive month. This continued fall in consumer demand and retail numbers may prompt the Fed to intervene with further QE if the trend continues. However, there has been positive news in the huge automotive sector as US business inventories rose in April as demand was also strong in the building material sector. Non the less, the Dollar came under pressure through yesterdays session and The dollar index, which measures the US unit’s performance against a basket of six major currencies, fell to 82.126 from 82.385.

Jamie Dimon took centre stage yesterday as he looked to defend the now infamous ‘London Whale’ hedge that cost the bank 2 billion USD. Speaking in front of the Senate Banking committee at Capitol Hill he staunchly defended the banks position and continued to fight the call for stricture legislation to control the banks investment arm. As a result of his performance JP Morgan Stocks where up 1.6%.

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Written by Tom Tong

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