Another uninspiring G8

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Morning Comment         

Current mid-market inter-bank spot rates (as at 08:20 GMT) 

Major sterling  

Major US$  

Sterling emigrate  

Other sterling  

Euro crosses 

Data / Events due today 

Fundamental 

Friday was quiet on the data front but following early morning dollar gains, there was a notable relaxation in the risk-off theme as investors trimmed long dollar positions ahead of the weekend G8 meeting. That said, the effect was really on seen in currencies as equity markets continued to sell off. 

The G8 meeting over the weekend was never really expected to deliver any major promises or solutions to the Eurozone crisis. The joint statement did say the group would ‘take all necessary steps’ to ensure the global economy is on a solid footing. There was also an unprecedented statement on oil as the group ramped up the pressure on Iran saying strategic reserves could be used if there were any future disruptions to supply. This is a clear message that the G8 will not allow global inflation to be adversely affected by rising oil prices. 

Greece remains a major problem given the guarantee of continued uncertainty ahead of next month’s second round of elections. Balancing austerity with growth is the tough task facing Europe but the majority agree this is the way ahead. The hard part will be implementation and unfortunately, in the case of Greece, there will be no major decisions ahead of the June 17^th vote. 

UK Rightmove house prices released overnight were unchanged on the month as sellers had to adjust expectations following the end of a first-time buyer tax break and amidst ongoing concern over the crisis in Europe.

A quiet day ahead so already the focus is on tomorrow’s UK inflation figures and Wednesday’s Bank of England MPC minutes. The first revision to UK Q1 GDP is due on Thursday along with retail sales while in Europe the German IFO survey and flash PMI estimates are also released. 

Technical  

£-usd 

Although staging an intra-day recovery from a 2-month low, the pound lost ground to the dollar for the third successive week and in doing so closed back below the 200 week moving average (now at 1.5862). This level will need to be regained to neutralise the recent sharp sell off and clear the way to recovery towards 1.5950 and 1.6000/20. Meanwhile, bearish focus is on 1.5770/35 with a break here suggesting further downside potential towards 1.5645/05 then 1.5540/1.5490. 

£-eur  

The first weekly loss for sterling in two months creates a potentially bearish formation and one which is backed up by a different but equally bearish picture on the daily charts. We have now almost closed the gap from 2 weeks ago at 1.2350 and if we do continue lower through this level we will look towards 1.2265 then 1.2170. Resistance now at 1.2420, 1.2445/70, 1.2500, 1.2525 and 1.2575/80. 

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