YB Currency Update – Monday 6th July

YB Currency Update – Monday 6th July

Trading was thin on Friday with America being closed for the Independence Day holiday and as such much of the market was flat. Going into the long weekend the S&P was down 2.9% and the VIX volatility index for the S&P was also up on Thursday mainly due to the poor employment figures out last week. Risk appetite has dropped over the last few days giving support to the USD after several weeks of weakness and GBP/USD is now back below 1.6150. Sterling has also lost ground against the Euro this morning sitting at below 1.16.

This week is set to be quite choppy after the poor news out last week investors will be more cautious and this could hurt the pound that has been treading water for the last week or so. There is not much data out this week but what information there is will be carefully considered and any weaker than expected results could give the USD more support due to it's "safe haven" status. We have the manufacturing and industrial production figures out for the UK tomorrow and the industrial production figures out for the Eurozone on Wednesday which could have an impact on Sterling and the Euro if they come in worse than expected. Later in the week we have the Bank Of England interest rate decision which although we are not expecting any change in the rates for some months yet, they may shed some more light on the quantitative easy policy currently in place and how they feel that is going and possibilities of expanding the measures.

Also coming up this week is the G8 meeting from Wednesday until Friday and news from this could be reflected in the markets although the request by China to discuss the status of USD as the sole reserve currency has been reported to be getting little support from participants but these may be one sided. Should this be picked up as a topic of discussion it could have massive implications for the greenback and could point to the days of USD as the main safe haven currency could be numbered.

Caution seems to be the view for this week and worse than expected news could pull Sterling back further causing it to loose out on the gains it has made over the last few months and fears of a double dip recession may rear it's ugly head.

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