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Angus Campbell

Dollar bounce on hold

Yesterday’s pull back in risk assets reminded investors that there remain considerable headwinds that threaten stability in the financial markets and often those headwinds are unforeseen. Political instability emerged in Spain and Poland to compound the worries over Greece who continues its negotiations in Brussels today with its creditors and this remains one of the major market risks facing investors, as was shown in the euro sell off yesterday. The dollar had a strong rebound on the back of ...

Angus Campbell

Greece worries send euro lower

The news flow over the extended week end has unsurprisingly been focusing on Greece as the end of another month nears and substantial payment deadlines loom. Not only will they have their monthly pension and civil servant pay packages to settle, but the next large slug back to the IMF is due on 5th June, a sum of around €300m and only a fraction of the total €1.6 billion to be repaid next month. After an impressive recovery by EURUSD all the way back above the 1.1400 level, the euro has been ...

Angus Campbell

Focus on ECB and inflation

Risk assets continue to edge higher with equity indices rebounding from recent sell offs and oil prices bouncing. The dollar rebound though just seems to have run out of steam as yesterday’s better UK retail sails saw GBPUSD recover most of its losses from earlier in the week and some half decent data from the Eurozone has kept EURUSD under pinned, with the latest German GDP data this morning also lending a hand as EURUSD trades at 1.1155. Even USDJPY has retraced having broken back above the ...

Simon Smith

Fed keeps outlook steady

The April FOMC meeting minutes last night did little to change perception on the Fed, namely that a June rate hike is off the agenda (but not totally ruled out) and that the economy does not seem strong enough yet for them to start their much anticipated tightening cycle. There was some dollar volatility around the release, but the net result was that the dollar was little changed and interest rate hike expectations were marginally softer. In the wider picture. FX has stabilised over the past ...

Simon Smith

Some rays of light in Japan

With all the volatility elsewhere, the yen (and in particular USDJPY) has been notable for its stability. This is certainly the nature of yen in recent years, with long periods of going nowhere and shorter periods of strong trends. The GDP data released overnight have pushed USDJPY to the upper end of the recent range, up to the 121 level for the first time since 20th March. The economy grew 0.6% in Q1, firmer than the anticipated 0.4% gain. There were some promising signs in the data, with a ...

Simon Smith

QE front-loading pushing down euro

The single currency taking a bit of a beating early on, which has seen nearly one big figure taken off EURUSD. ECB Governing Council member Coeure has said that the ECB is to front-load QE purchases in May and June ahead of the summer break and this has pushed down bond yields (and hence the euro) as a result. The RBA minutes were marginally dovish, inasmuch as the discussion referenced the potential for further easing should conditions warrant. Recall that the forward guidance was removed from ...

Simon Smith

The endless euro squeeze higher

The car crash that represents FX developments in Q2 looks set to continue, with price action in EURUSD the most pertinent representation of how the price action in FX over recent weeks has defied the conventional wisdom. Friday saw a fairly substantial squeeze higher of over 1 big figure to make a new high of 1.1467 and we start the European session not that far below. The fact that bond yields have come down from the recent highs last week also underlines the extent to which the euro move ...

Simon Smith

Further highs for cable

Thursday proved to be a steadier day for FX. The main standout was sterling where the push higher that was instigated in the wake of last week's election results continued, cable briefly touching the 1.58 level before pulling-back to the 1.5750 area. This came despite the noises from the Bank of England earlier in the week, the latest downgrades to growth forecasts suggesting that rates are likely to remain on hold for the remainder of the year. In the Eurozone, we saw equities recover in ...

Simon Smith

Going against the grain

So, once again the grand plan for the year (dollar strength) is close to tatters. This has strong echoes of last year, although at least things went to plan for the first ten weeks of the year. From being 11% up, the dollar is now only 3.5% up on the year (using the dollar index). Furthermore, yesterday the dynamics were working in the opposite direction of the perceived wisdom, with US retail sales data for April coming on the weak side, whilst some of the latest growth data in Europe showed ...

Angus Campbell

First BOE reaction to General Election

This morning eyes will be on the first release of UK unemployment data since the decisive General Election result, with the headline rate due to decline from 5.6% to 5.5%. Whilst there was a little dip in some of the UK economic data during Q1, there’s been a pick up recently and employment is expected to accelerate once again. The all-important wage growth figure is expected to show average earnings rising from 1.8% to 2.1%, which is all encouraging for the newly formed government, although ...

Angus Campbell

Gruelling summer faced by Greece

Greece met its latest IMF repayment deadline as the country continues to stand firm against the Eurogroup. The euro has also held its ground against the dollar with EURUSD ticking higher this morning trading at 1.1200 at the time of writing. This latest sum of around €770m is the biggest single payment to the IMF in a gruelling up and coming schedule of repayments throughout the summer with the real test coming not just in June, where another €1.5b is due back to the IMF, out of a total of ...

Angus Campbell

Greece looks under sofa for funds

A new week and a new deadline looms for Greece who are due to make their biggest repayment of the year to the IMF, around another €770m tomorrow. The have managed to find enough loose change at the back of the sofa to pay state wages and pensions as well as repay the last instalment of €200m to the IMF, but going forward without agreement on reforms it is going to be very difficult not to default at some point this summer, unless there are other items of furniture from under which funds can be ...

Angus Campbell

Election boost for sterling

In the end the polls measuring voter intention before the UK General Election have proved to be totally incorrect and now we are more certain that some form of stable government will be formed, similar to last September following the Scottish referendum on independence, the financial markets have breathed yet another sigh of relief. Not only has sterling jumped significantly gaining over 1% against the dollar and over 1.5% against the euro, but the FTSE 100 is expected to open higher ...

Angus Campbell

Sterling Softens on Election Day Uncertainty

Despite the prospect of the UK General Election almost certain to result in a hung parliament, the markets have been relatively undeterred by the potential outcome in the past few days, however tension seems to be building with a weaker pound this morning. The outcome will not become clear until the early hours of tomorrow and even though the polls have consistently pointed to no clear winner, the huge amount of undecided voters could still tip the balance, you only have to look at the ...

Simon Smith

Declining patience with Greece

Two events are dominating the outlook for today. The first is Greece; the second is the impending UK election. With regards to Greece, repayment of EUR 200 mln loan to the IMF is due today and the ECB is due to decide on the provision of emergency liquidity assistance to Greek banks, who are suffering on the back of the deposit outflows. It’s fair to say that the situation is a car crash waiting to happen, it’s just not clear when it will happen and how many causalities there will be. The ...

Simon Smith

RBA cuts and moves to neutral

The UK Bank Holiday made for a flat-line on most majors yesterday. We’re pretty much guaranteed more volatility for the remainder of the week. This will cumulate on Friday with the US employment report, where markets will be looking to see what extent the slowdown on headline payrolls seen in last month’s numbers what a blip or something more sustained. Ahead of that, we have the UK general election on Thursday, the result of which is the most uncertain for around forty years. This will mean ...