Quiet start to the week ahead of Thursday's key policy decisions

Morning Comment        

Current mid-market inter-bank spot rates (as at 07:55 BST)

Major sterling

Major US$

Sterling emigrate

Other sterling

Euro crosses

Fundamental

Further woe for the euro yesterday although, from a price perspective, reaction was fairly muted. Consumer confidence fell to its lowest level in three years and despite marginally beating initial estimates the -21.5 print, along with weak readings in economic confidence and business climate, underline the effect of the ongoing debt crisis in the region.

Data from the UK was hardly inspiring either as mortgage approvals fell to their lowest level since December 2010 while net mortgage lending also fell sharply. Retail sales data from the CBI also disappointed with reported sales down from a Jubilee inspired 42 in June to 11 for July, far worse than expectations. 

Overall however, trading was subdued ahead of Thursday’s key policy meetings in both the UK and Europe. Following last week’s speech from ECB President Draghi, markets are set up for some decisive action from the ECB. As such, there is once again room for disappointment as there is only so much the central bank can do within its price stability mandate.

Overnight, GfK UK consumer confidence was steady at -29 as expected.

Ahead today, German unemployment looks set to hold at 6.8% despite an anticipated 5k rise in the number of unemployed. Unemployment across the EZ region is seen rising a notch to 11.2%. Flash estimates for Eurozone inflation in July are seen showing inflation holding steady at 2.4% for a third consecutive month. This afternoon, consumer confidence in the States is seen slipping back slightly, a fifth consecutive month of declining sentiment.  

Technical

£-usd

The pound’s advance continues to be restrained by the 1.5720/85 resistance zone, an area which needs to give way to suggest two months of sideways actin may be coming to an end. Beyond here, 1.5910, 1.6000 and 1.6060 would come into play. Support of note while the upside remains contained sits at 1.5670/50 then 1.5590, 1.5495 and 1.5450.

£-eur 

The pound was under pressure for large parts of last week but bears were unable to take advantage with losses limited by 1.2700, well above the initial retracement level at 1.2650. Only below these two points now would suggest a deeper correction towards the strong 1.2575 level initially. Resistance today at 1.2840, 1.2870, 1.2890, 1.2910 and the strong 1.2995/1.3045 area.

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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