Market report Tuesday 29th
29 May, 2012
Yesterday saw a relatively quiet day on the markets with much of Europe on a holiday and US markets closed for Memorial Day. Having said that we still saw some movements in the currency markets with Sterling rising against the Dollar and falling against the euro, though the single currency’s strength was short lived.
Opinion polls released earlier in the day had shown that there was further support for a pro-bailout party in the up and coming Greece elections. With sterling benefitting from the doom and gloom in Europe any level of positive sentiment from the eurozone, coupled with the deepening UK recession, will bring some relief to the euro though many analysts see any euro strength as being short term.
We have seen a record level of euro shorts so it’s no surprise that the slightest ray of hope that Greece may not leave the euro leads to short-covering that helps the euro,” said Michael Derks, currency strategist at FXPro.
“But more generally sterling continues to attract decent capital inflows from Europe and Asia … the bigger picture is that euro/sterling will go lower.” He said the euro could drop to 75 pence by the end of the year.
More appetite to take on risk pushed sterling 0.2 percent higher against the safe-haven dollar however it remained not far from a 2 month low and some experts see the pound struggling further against the greenback in the coming months.
JPMorgan revised its sterling forecasts lower against the dollar and expects it to weaken to $1.54 by mid-year. It expected sterling to gain against the euro, though.
“Against the dollar, sterling will struggle, not least as speculative positions are now so long and the BoE signalled in its Inflation Report that the bias to ease policy remains intact,” it said in a report.
On the data front today we have the release of the UK CBI Trades Survey, German Consumer Price Index and US Consumer Confidence all of which could cause some waves in the currency markets today.
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