Mike Paterson’s daily Forex brief
I’ve long banged on recently about the Pound punching above its weight and yesterday, for a variety of reasons, we saw another reality check as the risk-averse sentiment prevails.
The biggest falls came in GBPJPY and GBPUSD with 350 pip and 160 pip declines respectively. In these risk-averse times the Yen came back into play and we saw rapid falls in USDJPY down to 79.22 where only fears of BOJ intervention have prevented further falls and with GBPUSD dropping through the key 1.5875-85 level it was a mad scramble to bail out of long-GBP positions.
A couple of key reasons, apart from our fall-out from the Eurozone and general economic woes, were more noises from MPC members about the need for further QE and the downgrading of 16 Spanish banks by ratings agency Moody’s including Santander, which has a large UK presence.
As the Greenback prevails EURUSD wasn’t without its own falls below 1.2700 again and we’ve been down to 1.2642 just above key support at 1.2625 as Greece’s Tsipras’ comments yesterday that he would never yield to European demands to impose “barbaric” austerity measures, which is now putting the whole Greek bailout in jeopardy. But with the Pound’s greater fall we’ve seen EURGBP rally strongly to 0.8055, 100 pips higher than 48 hours ago
Further Eurozone concerns came in the form of the Spanish government saying it can fund itself for “a few months” at present yields of around 6.38%. Given yesterday’s bank downgrades and the continuing pressure those months could soon turn to weeks or days.
After the failure to break down below key support levels that I’ve mentioned around $1520 we saw a sharp rally in Gold up to $1582 just short of key technical resistance and also a similar 3% rise in Silver as we saw a squeeze on short positions.
This week-end sees the G8 summit at Camp David where amongst other discussions and a show of trying to do something it appears UK PM Cameron will urge Chancellor Merkel to act more decisively to save the Euro and make it clear to her, as in speeches this week, that only Germany can save the day. No chance of a Merkoron anytime soon methinks.
Little in the way of data today but that’s irrelevant given that it’s Friday and the world is in turmoil so let’s see what fun and games we get to end the week.
It’s Day 2 of the First Test v the West Indies at Lords and with Stuart Broad bagging 6 wickets it would appear that England have the upper hand at 243-9, but this match has a few twists in it I’m sure.
And good luck to all you Chelsea and Hammers fans out there as your teams take on quite different tasks tomorrow.
Have a great week-end wherever it takes you.
Interbank Rates 08:53 BST
Today’s Data: BST
13.30-US – Core CPI
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