Positivity signs from the US amidst outlook review

Tom Tong19/Jul/2013Currency Updates

USD

Positive data out of the US saw the dollar strengthen against CHF and JPY. There was much less movement against sterling during Ben Bernanke’s speech as he simple reiterated that the Fed is committed to its tapering programme, however there is no rush to do this aggressively. Initial jobless claims decreased from 358K to a two month low of 334K supporting the Fed’s claims that the jobs market is on the mend. Since the tapering programmes are dependent on the unemployment levels, this is a move in the right direction in comparison to previous month data which showed unemployment levels not budging.

Keeping with the positive theme, the US outlook was revised from negative to positive by Moody’s rating agency. We saw the US move to a negative outlook back in August amidst concern that fiscal discipline was eroding and the economy was weakening. Moody’s has now reviewed its outlook on the basis that the government’s debt trajectory has steadied and the budget deficit was narrowing. This bodes well for the US as it is seeing growth whilst taxes are being increased and spending cuts are occurring.

There is no data out of the US today so the main focus will be on the G20 meeting.

GBP

U.K retail sales figures released yesterday morning exceeded expectations for the previous month by half a percent, as discounts spurred demand. After initially falling against the Euro the pound managed to retrace its initial loss to reach a weekly high, whilst the IMF stated that the U.K must do more to increase credit, as Bank of England’s stimulus power fades.

In other data, lending for property purchases increased to its highest point since the second quarter in 2008.

Data regarding the public net spending for the month of June will be released this morning, with lending between April and June reaching around 42 bn. Sterling had an impressive week against the greenback, starting with the Bank Of England showing Carney is evidently in control having all 9 MPC members siding with him.

EUR

Yesterday we saw the Euro lose close to a quarter of a percentage against the pound ,which may suggest that many investors continue to avoid maintaining euro denominated assets, post the ECB’s statement earlier on in the month regarding the implementation of low interest rates with the likelihood to remain for the foreseeable future.

The German finance minister paid a controversial visit to Athens and continued to prompt Greek leaders to continue with its austerity measures and reforms.

Data released earlier this morning included Producer Prices in Germany followed by Italian Industrial Orders and Sales and Spanish Trade Balance figures. We saw PPI data both YoY and MoM from Germany arrive as predicted and unchanged.

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Written by Tom Tong

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