Financial markets stabilise as negative headlines dry up

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Morning Comment     

Current mid-market inter-bank spot rates (as at 08:10 GMT) 

Major sterling  

Major US$  

Sterling emigrate  

Other sterling  

Euro crosses 

Data / Events due today 

Fundamental 

The euro began the week on the back foot with a report from a major fund manager predicting Spain will soon request official assistance from the ECB and IMF to help recapitalise banks. Spain’s economic minister responded saying the image of Spanish banks is worse than reality. Meanwhile, new French president Hollande intends to push for a Eurobond issue but he can expect stiff opposition from Angela Merkel, his German counterpart. 

In a generally quiet day where there was for once a lack of negative news out of Europe, there was finally a pause in the equity market slide which helped risk sentiment stabilise. 

Ahead today, the prime event risk from the calendar is provided by UK inflation data. CPI is expected to have grown at a faster rate through April although on an annual basis we should see a decline following the blip higher in March. The recent sharp fall in oil prices should ensure this April rise in CPI is reversed next month. In the States, following a sharp fall in the Philadelphia manufacturing index, the pullback in Richmond may be stronger than consensus. 

Technical  

£-usd 

As noted yesterday, the 200 week moving average (1.5862) looks set to be a pivotal level and we held well below this level yesterday and again overnight. By the same token, pivotal support lies in the 1.5770/35 area giving us a reasonably well defined range to monitor. We open today slightly north of the 200 day moving average (1.5815) but only a sustained push through 1.5860/70 suggests the correction gathers pace towards 1.5950 then 1.6000/20. Below 1.5735 would clear the way to 1.5645/05 then 1.5540/1.5490. 

£-eur  

The bearish signs noted yesterday on both daily and weekly charts were enough to ensure the pound traded on the back foot for a fourth successive day for the first time in 8 months. The gap to 1.2350 from two weeks ago has now been filled which may be enough to satisfy some bears. We continue to monitor this level for signs of the downturn extending with 1.2265 and 1.2170 the next downside targets. Resistance today at 1.2400/05, 1.2435, 1.2460/65 and 1.2490/1.2500. 

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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