GBP/USD July Currency Update
Aug 3rd 2010, 12:17 pm
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GBP/USD July Currency Update
US Final Q1 GDP released at the beginning of the month, came in worse than expected at 2.7% y/y (exp 3.0%), with the figures showing an economy that was more dependent on inventory restocking and less driven by demand from consumers and businesses. This did cause some concern over the strength of the recovery. Inflationary pressures in the US remain subdued, confirmed by Core PCE, the Fed’s preferred measure of inflation, showing a modest 0.2% rise in May. A sharp drop in Consumer Confidence to 52.9 from 63.3 was the catalyst for a huge flight to safety as equity markets plunged close to three percent. Coupled with concerns over a European liquidity drain, as an important ECB loan facility expired, investors raced to pick up US Government debt at an amazing pace which saw the yield on the 2 year note reach an all time low.
Non-farm payrolls followed in the footsteps of the ADP private employment change by falling 125k. However the unemployment rate managed to fall to 9.5% (the lowest since July 2009).
Weekly jobless claims were positive and showed a drop of 18k on the previous month which is a positive sign; however we remain concerned about the strength of the US labour market. The USD was sold off heavily after strong rallies on equity markets resulted in improving risk appetite so less demand for the greenback..
The US Trade deficit reached its highest level since November 2008 (-42.3b), with a rise in imports from China. The Federal Budget balance was better than expected, showing a deficit of $-68.4b (-81.6b exp) and a significant improvement on the previous month (-135.9b) but these debt levels are expected to weigh heavily on the USD in the future.
CB Consumer Confidence (50.4 from 52.9), Richmond Manufacturing (16.from 23) and Core Durable Goods (-0.6% m/m) all disappointed and the Fed Beige Book supported the view that economic growth was weak to moderate across the country. The Fed continues to talk down the US economy as well, with Fed Governor Bullard expressing concern that the Fed’s language of interest rates at low levels for an ‘extended period’ was increasing the risk of a Japan-like deflationary trap.
Current Central Bank Rates:
EU (Central Bank): 1.00%
US (Federal Reserve): 0.25%
EUR/USD Highs & Lows of July:
High: 1.3108
Low: 1.2194
A movement of: 5.60 %
Difference this would make on €200k
High: $262,160
Low: $243,880
A difference of $ 18,280
Kind regards
Mark Bodega
Director - HiFX
Non-farm payrolls followed in the footsteps of the ADP private employment change by falling 125k. However the unemployment rate managed to fall to 9.5% (the lowest since July 2009).
Weekly jobless claims were positive and showed a drop of 18k on the previous month which is a positive sign; however we remain concerned about the strength of the US labour market. The USD was sold off heavily after strong rallies on equity markets resulted in improving risk appetite so less demand for the greenback..
The US Trade deficit reached its highest level since November 2008 (-42.3b), with a rise in imports from China. The Federal Budget balance was better than expected, showing a deficit of $-68.4b (-81.6b exp) and a significant improvement on the previous month (-135.9b) but these debt levels are expected to weigh heavily on the USD in the future.
CB Consumer Confidence (50.4 from 52.9), Richmond Manufacturing (16.from 23) and Core Durable Goods (-0.6% m/m) all disappointed and the Fed Beige Book supported the view that economic growth was weak to moderate across the country. The Fed continues to talk down the US economy as well, with Fed Governor Bullard expressing concern that the Fed’s language of interest rates at low levels for an ‘extended period’ was increasing the risk of a Japan-like deflationary trap.
Current Central Bank Rates:
EU (Central Bank): 1.00%
US (Federal Reserve): 0.25%
EUR/USD Highs & Lows of July:
High: 1.3108
Low: 1.2194
A movement of: 5.60 %
Difference this would make on €200k
High: $262,160
Low: $243,880
A difference of $ 18,280
Kind regards
Mark Bodega
Director - HiFX
