- Upbeat US data halts USD slide
- UK retail sales is today’s highlight
I hope you managed to escape the storm relatively unscathed although I
am sure many of you in the UK will, like me, be repairing fences this
weekend. Oddly enough, whilst the weather outside was frightful, the
markets were less stormy and a swathe of positive US data failed to
lift the US Dollar from its lack of lustre. However, it did stop the
rot and right now the USD is almost exactly where it was for most of
yesterday. Sterling is also rather coy; although this has more to do
with the fact that all the good news is factored in now. We are at some
very significant levels on Sterling crosses at the moment with GBPEUR
testing the 38 percent retracement level of the all time high to the
all time low (it means nothing unless you are a technical analysts but
it is very exciting for chartists for whom Fibonacci retracement levels
mark significant support and resistance). GBPUSD is still stalling at
the top of a 13 year long channel and should fall, GBPCAD is testing
the top of the year long channel but the direction from here is less
clear. There are equally significant levels in may other crosses and
whilst each reporter and commentator has their own take on these moves
but they are in unison when it comes to the major driving factor in
today’s market and that driving force is interest rate yields. And to
be more precise, not the existing and priced in interest rates but the
potential changes to interest rates in the future. For example, it is
expected that UK interest rates will rise once more before the first
half of 2007 and so any alteration of that view will damage the Pound.
It is assumed that US interest rates will remain on hold for now and
the receding notion that there may be an early cut is being priced out
of the market right now. That has the potential to strengthen the US
Dollar and is the main reason for the USD rebounding from $1.98 against
the Pound yesterday. So as changes in expectations occur, changes in currency
values will follow. I’ll keep you posted. Today’s UK retail sales
numbers which were the best December numbers for three years may help
the Bank of England decide on the date of their next interest rate hike
and that is our focus for the day. And finally, isn’t it sad that the
word goody has been so inappropriately applied to the most unlikely
celebrity of all. Have a great weekend.
Yesterday was awash with US data and the bulk of it was pretty good. An
upturn in the Philadelphia Fed index, a measure of manufacturing
growth, and inflation both helped the USD and they followed on from a
Beige Book report which, upon a full reading, should give the US
authorities a degree of comfort. If you were trying to stop a slowing
economy from falling into recession, I would bet you would want
encouraging signs in commercial property and manufacturing because the
demonstrate business optimism and should lead to more jobs and more
consumption. That is exactly what the Beige Book reported and the only
negatives came from the housing sector and retail spending. As long as
the rest of the news from the US relating to corporate business is
encouraging this month, I would expect the return of US Dollar
strength. Having said that, we are expecting rather better figures on
the University of Michigan consumer sentiment report this afternoon and
that too will be good for the USD.
How to get your son a wife & a job
Charles speaks with his son.
Charles: "I want you to marry a girl of my choice."
Son: "No - I will choose my own bride!"
Charles: "But the girl is Bill Gates' daughter."
Son: "Well, in that case... OK!"
Next, Charles approaches Bill Gates.
Charles: "I have a husband for your daughter."
Bill Gates: "But my daughter is too young to marry!"
Charles: "But this young man is a vice-president of the World Bank."
Bill Gates: "Ah, in that case... OK!"
Finally, Charles goes to see the president of the World Bank.
Charles: "I have a young man to be recommended as a vice-president."
President: "But I already have more vice-presidents than I need!"
Charles: "But this young man is Bill Gates' son-in-law."
President: "Ah, in that case... OK!"
As soon as folk see my face on the movie screen they know two things:
First, I'm not going to get the girl and second, I'll get a cheap
funeral before the picture is over.
Lee Marvin
FX Research and Analysis undertaken by:
David Johnson - Halo Financial
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