No let up as investors continue to liquidate risk assets

Morning Comment          

Current mid-market inter-bank spot rates (as at 08:30 GMT) 

Major sterling  

Major US$  

Sterling emigrate  

Other sterling  

Euro crosses 

Data / Events due today 

Fundamental 

Spain managed to raise close to full target in yesterday’s bond auctions but unsurprisingly were forced to pay significantly higher yields. Elsewhere, news of client fund withdrawals from both Spanish and Greek banks continued and a report stating a major currency broker is ready to trade Greek drachma did little to allay fears that a Greek exit is edging closer. Rumours of possible mass downgrades for Spanish banks also surfaced and Moody’s delivered with sweeping cuts to 16 banks and four Spanish regions. 

US data was also disappointing as the leading indicator fell for the first time in seven months, initial jobless claims deteriorated and the Philadelphia Fed manufacturing index fell below zero for the first time since September 2011. 

All told, it was yet another risk-off day with global equities continuing to tumble while the US dollar and Japanese yen gained ground once more. 

A very quiet end to the week with regard to scheduled releases but newswires are still likely to busy, particularly on European issues with G8 meetings scheduled to take place today and tomorrow.   

Technical  

£-usd 

The pound has now fallen 5 ½ cents in the last three weeks with 3 ¾ cents of the cumulative loss coming in the last three days. This acceleration of position liquidation has cleared an area of considerable support between 1.5900 and 1.5825 and is now seeing the 50% retracement of the January/April rally at 1.5770 tested. Bears have taken control since the break of the bull trendline on Tuesday. While in itself this was not unexpected, the severity of the decline has taken many by surprise. In the absence of an escalation of anti risk sentiment ahead of the weekend, there is a good chance the pound could now dig its heels in for a day or two. Directly below the overnight low of 1.5735 then 1.5720 however would likely usher in another wave of selling with 1.5645 the next target. Resistance now at 1.5825, 1.5880/1.5900 and 1.5950.

£-eur  

Sterling gave up further ground yesterday as momentum studies turned negative. Bears are eying 1.2385/50 as an initial target zone with potential to 1.2265 is this area gives way. Resistance today at 1.2480/1.2500, 1.2575/80 and 1.2615. 

Analysis of further currency pairs, forward contract pricing, and information on limit or stop loss orders is available at any time on request.                                          

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