YB FX Daily Report – 10th of July

YB FX Daily Report – 10th of July

The Bank of England mentioned yesterday that they were not looking to extend the £125bn Quantitative Easing plan, for the moment at least. This gave GBP the boost it needed to claw back some of the losses it has made over the last few days and settled some investor nerves pulling GBP back above 1.1675 against the Euro and above 1.63 against the US Dollar. Although there was no mention of extending the QE measures this month it is not ruled out totally so next months meeting may be one to watch. This was coupled with slightly optimistic ECB Monthly Report out yesterday that reiterated Trichet's comments last week saying that although the Eurozone economy was very weak they expect positive GDP to return from mid 2010 although the initial gains made by the Euro soon were lost. Several Eastern European countries are partly to blame for the weak Euro at the moment as at least 10 countries are expected to be asking the IMF for some extra cash and, due to the close ties with the eurozone there must be some of their debts sat with Eurozone banks that look a little shaky now.

Very little data out yesterday and with barely a squeak coming from the G8 yesterday including the fact that there was "no real discussion" about the role of the USD as a receive currency according to Gordon Brown but the BRIC nations (Brazil, Russia, India & China) are expected to bring the subject up again at the G20 in September. Risk aversion retreated a little though as most equity markets and commodities were up albeit only slightly but after the last few days of negativity it makes a refreshing change going into the weekend.

A little more data out today with the US trade balance for May, US import price index and the UK Producer Price Index all out today meaning the markets are a little cautious ahead of these announcements but we are not expecting sterling to lose out on gains from the last 24 hours, at least against the Euro as the USD may still benefit from the flight to safety that seems to be a regular occurrence of late.

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