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ECB decision finely balanced
06/06/2012
Morning Comment
Current mid-market inter-bank spot rates (as at 07:50 GMT)
Major sterling
|
£-usd
|
1.5445
|
£-eur
|
1.2365
|
€-gbp
|
0.8001
|
|
£-jpy
|
121.90
|
£-chf
|
1.4855
|
|
|
Major US$
|
eur-$
|
1.2490
|
$-eur
|
0.8006
|
Sterling emigrate
|
£-aud
|
1.5695
|
£-nzd
|
2.0265
|
|
£-cad
|
1.5960
|
£-zar
|
12.94
|
Other sterling
|
£-dkk
|
9.1935
|
£-sek
|
11.1170
|
£-pln
|
5.3910
|
|
£-trl
|
2.8440
|
£-hrk
|
9.3555
|
£-sgd
|
1.9770
|
|
£-aed
|
5.6720
|
£-thb
|
48.65
|
£-bgl
|
2.4180
|
|
£-brl
|
3.1240
|
|
|||
Euro crosses
|
€-brl
|
2.5265
|
€-aed
|
4.5870
|
€-trl
|
2.3000
|
|
€-hrk
|
7.5660
|
|
|||
|
|
Current Price
|
2012 open
|
YTD change
|
Month Open
|
MTD change
|
2011 change
|
|
£-usd
|
1.5445
|
1.5501
|
-0.4%
|
1.5406
|
+0.3%
|
-0.4%
|
|
£-eur
|
1.2265
|
1.1978
|
+3.2%
|
1.2461
|
-0.8%
|
+2.7%
|
|
£-chf
|
1.4855
|
1.4552
|
+2.1%
|
1.4967
|
-0.7%
|
+0.0%
|
|
£-jpy
|
121.90
|
119.31
|
+2.2%
|
120.66
|
+1.0%
|
-5.7%
|
|
£-aud
|
1.5965
|
1.5169
|
+3.5%
|
1.5830
|
-0.9%
|
-0.6%
|
|
£-cad
|
1.5960
|
1.5830
|
+0.8%
|
1.5913
|
+0.3%
|
+2.2%
|
|
eur-$
|
1.2490
|
1.2941
|
-3.5%
|
1.2363
|
+1.0%
|
-3.0%
|
Data / Events due today
|
Time
(bst)
|
Country
|
Data/Event
|
Period
|
Consensus
|
|
09:30
|
UK
|
PMI Construction
|
May
|
54.5
|
|
10:00
|
EZ
|
GDP
|
Q1 q/q
|
Flat
|
|
10:00
|
EZ
|
Household Consumption
|
Q1 q/q
|
0.1%
|
|
11:00
|
EZ
|
German Industrial Production
|
Apr m/m
|
-1.0%
|
|
11:00
|
EZ
|
German Industrial Production
|
Apr y/y
|
0.9%
|
|
12:45
|
EZ
|
ECB Interest Rate Decision
|
Jun
|
No change to 1% rates
|
|
13:15
|
US
|
Fed’s Lockhart speaks
|
|
|
|
13:30
|
EZ
|
ECB Press Conference
|
|
|
|
19:00
|
US
|
Fed Beige Book
|
|
|
|
20:30
|
US
|
Fed’s Williams speaks
|
|
|
|
00:01
|
UK
|
BRC Like-for-like sales
|
May y/y
|
0.7%
|
Fundamental
We return from an extended Bank Holiday weekend in the UK to see today’s ECB policy meeting high on the agenda. With deterioration in the overall economy, the outlook far from bright and continued pressure on the Spanish banking system, a much needed boost from a rate cut cannot be discounted. However, the ECB prefer not to surprise markets and the likelier outcome today is a statement preparing markets for action next month.
Data in Europe underlined the problems with services PMI contracting for a fourth consecutive month, retail sales fell 2.5%, the sharpest decline since October 2009 while German factory orders were also soft. Spain’s Treasury minister also warned they were having problems accessing markets as bond yields hold at unsustainably high levels.
In the States, there was a slight upside surprise in the non-manufacturing ISM which once again highlighted the relative strength in the US. Despite this, there are reports that the Fed is considering some form of QE3.
While UKmarkets were closed on Monday, Egan-Jones ratings agency cut their sovereign rating to AA- from AA on rising debt and the UK’s exposure to Europe.
There was a notable pick up in risk sentiment overnight with Australian Q1 GDP coming in far stronger than consensus (1.3% against expectations of 0.5%). As a result, and on the back of a strong start to the week in US equity markets, we can expect a firmer opening in Europe than we’ve seen for some time.
Ahead today, the clear focus is on the ECB decision and press conference. The Fed’s Beige book tonight is expected to show a general slowdown which will only serve to increase calls for additional stimulus measures.
Technical
£-usd
The pound opens this morning on the front foot for once following a 9-day decline into the end of last week that came close to threatening the 1.5240 January low. Upside momentum is also beginning to pick up but we are a long way away yet from any indication of a meaningful turn around in sentiment. Initial upside target form here is 1.5515 followed by 1.5665. Support now at 1.5380, 1.5325 and 1.5270/40.
£-eur
Sterling selling since the middle of last week continued early yesterday but the subsequent bounce has ensured support at 1.2265 remains firmly intact. Initial resistance today at 1.2395 ten 1.2430, 1.2465 and 1.2510/25. Yesterday’s 1.2280 low protects the previously mentioned 1.2265 level which in turn is the gateway to strong support at 1.2170/60.
Analysis of further currency pairs, forward contract pricing, and information on limit or stop loss orders is available at any time on request.
Telephone 0131 476 7371
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