Euro recovers in quiet trade

Morning Comment        

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

Major sterling

Major US$

Sterling emigrate

Other sterling

Euro crosses

Data / Events due today

 
Fundamental

A somewhat less than lively day was notable for a steady squeeze higher in the euro. In the absence of any particularly market making news, the single currency enjoyed a welcome relief rally. Risk assets in general remain supported by expectations of central bank action, potentially even coordinated, to lend additional support to the global economy. The euro was the prime beneficiary of this theme although it closed the days off its highs on a report there could be a delay in the expected German Constitutional Court ruling on the ESM. A similar ruling is scheduled at the European Court of Justice in Luxembourg following a complaint against the ESM from Ireland, prompting a call for a delay in the German Court sitting. Meanwhile, another rise in margin requirements on some Spanish and Italian bonds also undermined the euros earlier performance.

Already released this morning, Q2 GDP in both France and Germany was a shade better than expected. In France, growth was flat against expectations of a 0.1% contraction while in Germany, exports and consumption helped Europe’s largest nation to 0.3% growth in the second quarter.

Today more than makes up for yesterday’s absence of data with a full calendar. We kick off with UK inflation figures for July where economists expect to see another slowing to 2.3% from 2.4% in the headline data. Eurozone GDP for Q2 is next up with region expected to have contracted by 0.2%. The German ZEW economic sentiment indicator is also released this morning with little change seen, although a downturn in the current situation is anticipated. Eurozone industrial production is also expected to decline although at a slightly slower annual pace than in May. In the States, retail sales are expected to rebound following three consecutive months of decline.

Technical

£-usd

Sterling pushed higher again yesterday, coming close to the lower end of the 1.5720/85 resistance zone by mid-afternoon before tailing off once again. Momentum studies are beginning to pick up so we cannot rule out further testing of this area although an immediate sustained break through 1.5785 is still hard to envisage. If seen however, look towards 1.5910 then 1.6000 and 1.6060. Support today at 1.5655, 1.5610, 1.5575, 1.5525 and 1.5490.

downside targets.

£-eur 

Progress through the pivotal 1.2750 level have remained limited to yesterday’s 1.2775 Asian high and sterling ultimately opened the week correcting some of last week’s gains. Initial support today sits at 1.2690 then 1.2665, 1.2640 and 1.2610 ahead of the strong 1.2575/60 level. Resistance now at 1.2725, 1.2750/75, 1.2850 and 1.2890.

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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