Currency Update – Monday 12th July

Currency Update – Monday 12th July

The World Cup has finally reached its conclusion and the best team won out in the end although they did have to face a physical beating in the final before lifting the trophy. The rather dour final has been said to bring discredit to European football, but Spain will care little for that, and seem to be on a winning streak with Nadal winning Wimbledon and Alberto Contador the strong favourite for the Tour de France. The Euro has been also on the front foot over the last week or so, and at least some of that has been due to an easing of fears over the results of the ECB banking stress test. It is likely that the markets are a bit too sanguine over the emerging details of the ECB’s stress test, and the Spanish banks, along with their Eurozone counterparts, won’t perform as well as their sportsman. This might limit the Euro’s gain in the coming weeks, and we have already seen the Euro lose some of its strength dipping back below 1.26 against the US Dollar, after hitting 1.27 last week.  

China released some data over the weekend showing exports growing to pre crisis levels, a massive 43.9% yoy growth, however imports are not performing quite so well, rising less than expected at 34.1% yoy.  On Tuesday we get the latest GDP figures for China and there is an expectation that it may ease slightly, which may weigh further on the Australian Dollar, especially in light of the lower imports of raw materials. The AUD has been finding some support after it’s extremely strong jobs data, but as a currency linked to global growth it still remains vulnerable to general fears, and to worries over China in particular.

A couple of weeks ago we the ONS took the highly unusual step of delaying the release of the GDP revision, citing the discovery of errors; they have release those figures this morning and they have shown no revision to the GDP for Q1 which says at a anaemic rate of 0.3%, so well worth the wait. We have also seen the latest current account figures which have shown the deficit slightly larger than expected, and although the data has sent the Pound lower it is likely to hamper any progress throughout today.

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