Mike Paterson’s daily Forex brief
It appears that markets have breathed a sigh of relief after Friday’s EU summit decision on lending and the Euro continues to attract a few buyers.
The EU's existing bailout fund, the European Financial Stability Facility (EFSF), will provide help under the current rules until the new permanent fund, the European Stability Mechanism (ESM), is ready to take over after its launch next month.
The funds will not only be able to lend directly to banks, they will also be used to buy the bonds of countries like Italy and Spain, whose borrowing costs have soared, with the intention that those countries will not have to apply for a formal Greek-style bailout.
There is plenty more to discuss and the jury is still very much out as to the extent these latest measures will help the bigger picture, but given that expectations were at rock-bottom going into the summit it seems they’ll do for the moment.
EURUSD has edged higher again after Friday’s initial wave of profit taking and we’ve seen 1.2681, just shy of decent resistance around 1.2690. EURGBP has also moved higher again and appears to have formed a base at 0.8050 (GBPEUR resistance at 1.2422) but lacks momentum to challenge resistance between 0.8090-0.8100 for the time being at least.
GBPUSD had a look above 1.5700 but it too has fallen back with the UK’s banking system looking to come under close scrutiny this week.
Tonight the RBA make their latest Aussie interest rate decision which we expect to remain on hold, and the Aussie $ is finding support with AUDUSD at 1.0257 and GBPAUD down to 1.5290.
Eurozone Unemployment is out this morning while UK Manufacturing PMI just out shows a decent rise but still under the key 50 level. The Pound has found a few buyers as I type with GBPUSD up to 1.5787 and EURGBP down to 0.8058 (GBPEUR 1.2410).
Spain made footballing history by retaining their European Championship title in fine style, and England’s cricketers have taken an impressive 2-0 lead against the Aussies while I’ve been battling the elements over the weekend with less success. Sadly we were forced to retire from the Round the Island race having pushed our boat to the max in tough conditions and suffering rigging problems making it impossible to carry on. With almost 50% of the entrants also being forced to drop out we certainly weren’t alone! A great experience though and we’ll be back next year to do battle once more.
Have a good week out there.
Interbank Rates 08:52 BST
Today’s Data: BST
09.30-UK – Manufacturing PMI
10.00-EU – Eurozone Unemployment
15.00-US – ISM Manufacturing Index
15.30-AU – RBA Interest Rate Decision
Agree or disagree? Then please leave a comment in the box below or contact me by e-mail.