Currency Update – Monday 21st June

Currency Update – Monday 21st June

Anyone who watched the England game on Friday would have spent most of the weekend depressed, in spite of the good weather, however things may not be as bad as portrayed, England only need to win the next five games in a row to win the World Cup, although on current form the next game will be a struggle. England may be struggling for results, and have dissension in the ranks, but we can be thankful to the other European nations for giving us company, Italy have also drawn two games, both Germany and Spain have lost games, while the French are not only almost certainly out, but typically of the French, they have also decided to go on strike. We get onto the last round of the group games this week and there is likely to be a few European tears before the week is over.

In contrast to the poor results for the major Eurozone nations in the World cup, the general sentiment in the markets has improved for the Euro which has allowed it to push up against the Dollar and sit above 1.24. The Euro has not made the same amount of gains against the Pound which has managed to hold onto levels above 1.19, although tomorrow’s budget is likely to alter that somewhat.
The ECB issuing the results of the banking stress test, along with successful bond auction for a couple of the under pressure nations, have helped shore up the Euro, although it’s rise against the Dollar has been helped along by a rise in general sentiment as the news that China is going to allow the Yuan (CNY) to float. The announcement comes ahead of the upcoming G20 conference and the regular US report on the FX strategies of other countries, which may have designated the Chinese government as ‘currency manipulators’ (which they clearly are). The move is unlikely to make much difference in the USD/CNY rate in the immediate future, and the Chinese government are unlikely to allow the rate to move much in the medium term, but the news has still been welcomed and the usual rise in risk appetite has pushed the Dollar down, allowing the Pound to push up towards 1.49 over the weekend.

All eyes in the UK will be on tomorrow’s budget, with the Chancellor promising the pain will be spread around, and also promising that the budget will be a long term strategy covering the life of the parliament, rather than just the next 12 months.  There is nothing else released for the UK before then, and nothing for anyone else today either, so the Pound is likely to stay rangebound up to tomorrow’s big announcement.

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