Caxton FX Currency Blog: 06/19/09

Friday 19 June 2009

Sterling weakened by 0.16 cents (0.14%) against the euro yesterday to close the day at 1.1745.

In early trading yesterday sterling hit a one-week low against the euro, after data showed UK retail sales unexpectedly fell in May, down 0.6% from the previous month. Overall, that left retail sales 1.6% lower than the same month a year ago.
The pound also fell yesterday after separate figures showed Britain’s public finances deteriorated more than expected last month, with public sector net borrowing rising to a record high of nearly £20 billion.
In trading so far today the pound has dipped slightly against the euro as investors continue to assess recent less positive announcements.
There are no major announcements due in the eurozone or UK today.

Sterling weakened by 0.68 cents (0.41%) against the US dollar yesterday, finishing the day at $1.6329.

In early trading yesterday the pound initially rose on the back of improved risk appetite, before nose-diving because of disappointing UK retail sales figures. Sales fell 0.6% in May, well down on analysts’ forecasts of a 0.4% gain. That left them 1.6% lower than in the same month a year ago.
Meanwhile, a Bank of England report showing that lending to British businesses fell by its biggest amount in nearly nine years in April increased selling pressure on sterling. Investors took this news as a sign the recession was far from over despite some positive data recently, with UK companies still finding it difficult to attain credit.
In trading so far today the pound has made limited gains against the greenback as investors consider recent developments.
There are no major announcements out in the UK or US today.

The euro dipped by 0.41 cents (0.29%) against the US dollar yesterday to finish the day at $1.3898.

In early trading yesterday, the dollar fell against the single currency after the latest Philadelphia Fed survey came in above expectations and much less negative than the month before. The index of business conditions in the US Mid-Atlantic region was -2.2 this month, well ahead of last month’s -22.6, prompting increased demand for riskier currencies like the euro as investors speculated that the world’s largest economy could be on the cusp of recovery.
However, US Unemployment Claims figures released mid-afternoon stifled this optimism as they came in worse than the month before, prompting investors to head back to the safe-haven of the greenback. Jobless claims stood at 608k in May.
In trading so far today, the euro has risen against the dollar as traders consider the economic releases out so far this week.
There are no major announcements due in the eurozone or US today.

The Australian dollar made solid gains against sterling yesterday, as doubts arose over the UK's economic recovery.

UK retail sales data surprised markets by falling 0.6 percent in May, against a forecast gain of 0.4 percent.
Other news also showed that Britain’s public finances deteriorated more than expected last month, while lending to British businesses fell by the largest amount in 9 years.
This data has illustrated that there is still a large gap between recent investor optimism and economic fundamentals.
This suggests that any economic recovery is going to be fragile and likely to be stuttering, with economic confidence and optimism likely to continue to ebb and flow on either positive or negative data.

The New Zealand dollar remained within recent ranges against the aussie yesterday, but managed to gain some ground on a weakening pound.

The kiwi remained relatively steady as markets continue to remain cautious over higher yielding currencies, given uncertainty over the global economic recovery.
With no local data due investor are likely to turn their focus to next week’s first-quarter current account and growth data.