Currency exchange update 01/07/09
- Sterling sold off aggressively against majors after release of GDP data
- UK economy shrinks most in 50 years
- Dollar rallies – players dump riskier currencies such as pounds and euros
- Rand rallies on back of unexpected trade surplus
- Oil rebounds to $70.55 after falling overnight
US Dollar: The dollar rose against most major rival currencies yesterday and has continued in Asian trade this morning as Asian dealers followed in the footsteps of US players who dumped currencies such as euros , pounds and yen for dollars. Risk aversion crept back into the markets after the rally in equities stalled. The greenback’s reversal on the pound came after the UK released its GDP data, which came in extremely weak. Initially at the start of trading yesterday, the dollar hit an eight month low on the pound getting close to $1.6750, but then the GDP data was released at 09.30 and the pound was subsequently sold off across the board. This saw the buck take back over three cents, which has continued into this mornings trade, now trading at $1.6430. Traders say that the US currency is likely to stay hemmed in a narrow range today because many players are reluctant to actively buy the dollar ahead of US employment data due later today. The dollars move yesterday also swept aside the euros gains made at the start of the week. Risk aversion saw the buck take over one and a half cents of the euro to trade at $1.40 in late afternoon trading. Data 15.00: ISM Manufacturing 44.0 from 42.8 & Pending Home Sales 1.1% from 6.7%. Speakers 16.15: Fed’s Evans.
Pound: The feel good factor which saw the pound rally to eight month highs against both the euro and dollar yesterday was quickly brushed aside yesterday after a dismal GDP figure was released at 09.30. Initially the pound was rallying on fairly good economic data and a fall in risk aversion. This saw cable rise to $1.6744 and GBP/EUR hit 1.1852. Then came the GDP figure and the pound surrender most of its gains, pushing the pound back to below $1.64 on the dollar and below the 1.17 level against the euro. The data showed the UK economy shrank by 2.4% and the most in more than half a century in the first quarter, according to revised figures which were much weaker than originally estimated. The decline in GDP was sharper than the 1.9% calculated and the figure was the worst since 1958. This figure clearly spooked the markets and there was nothing else for holders of sterling to do other than dump them! Data 09.30: PMI Manuf. 46.0 from 45.4 & Index of Services.
Euro: The euro took full advantage of an under pressure pound yesterday after initially falling to its weakest level in eight months. The euro was initially trading at 0.8437 first thing yesterday morning, but then a release of GDP data from the UK saw the single currency rally more than 1.5% to trade at 0.8561. There was a slightly different picture for EUR/USD as risk aversion re-appeared which saw players dump the euro and pound in favour of the dollar. This saw over a cent lost to trade just under the $1.40 level, but has come back slightly this morning to push over the $1.4050 level. No data.
General:
The Rand rallied to a month high against the pound and ten month high on the dollar after South Africa posted an unexpected trade surplus and better than forecast economic data in Europe and Asian boosted demand for higher yielding assets.
Mid-prices
GBP/USD 1.6440
GBP/EUR 1.1681
EUR/USD 1.4067
GBP/JPY 159.09
GBP/AUD 2.0366
GBP/NZD 2.5431
GBP/ZAR 12.6301
GBP/CHF 1.7808
GBP/CAD 1.9041
GBP/SGD 2.3806
GBP/THB 55.74
GBP/HKD 12.736
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