Currency market volatility
Please see below International FX’s market report. Its of particular interest due to the US debt ceiling negotiations (or lack of) and the uncertainty this is causing in Forex markets.
Data on Wednesday showed UK industrial order expectations had fallen more than expected in July. In a report by the Confederation of British Industry, industrial order expectations declined to – 10.0 in July, compared to a 1.0 reading back in June. Analysts had expected a decline in July to – 3.0 in July.
A reading above 0.0 indicates increasing order volume is expected, whilst below indicates expectations are for lower volume. For the first time in two years, optimism regarding the general business situation fell among UK manufacturers and expectations of slower activity are driving a reappraisal of forwardlooking
business plans. Growth in total orders and production eased slightly in the three months to July and manufacturers expect a further deceleration over the next quarter.
Commenting on the report, Ian McCafferty, CBI Chief Economic Advisor, said “This slowdown is expected to persist into the third quarter. How far the slowdown will be borne out is yet unclear, but the combination of political and economic uncertainty is sapping confidence.”
Over in the USA, official data showed that US durable goods also fell unexpectedly in June. The Commerce Department said durable goods orders dropped 2.1%, led lower by a decline in orders for transportation equipment, after a 1.9% increase in May. Analysts had expected orders to rise by 0.4% in May. Excluding transportation, orders edged up 0.1% after gaining 0.7% in May.
The pound still remained supported as talks on raising the US debt ceiling remained at an impasse, adding to concerns over a possible US debt default or downgrade ahead of the August 2nd deadline.
The euro weakened earlier yesterday, also, amid fears that the Eurozone’s bailout fund may be insufficient to prevent sovereign debt contagion after Wolfgang Schaeuble, the German Finance Minister, said that Berlin was against a “blank cheque” for the European Financial Stability Facility to purchase bonds on the secondary market.
Late in the afternoon, EUR/USD dropped sharply back below the 1.44 as a failed topside rally earlier in the day, saw a few weak longs start to bail. Risk-off is also increasing further as the Dow Jones maintains its triple-digit losses, whilst players are likely rolling their eyes at more worrying news that Unicredito shares have been suspended again, due to the excessive volatility of the markets.
Jean-Claude Trichet was trying to boost sentiment and argued that speculating over a Greek default will lead to heavy losses given the provisions put in place last week. He was also heard to have said that the EMU has fewer problems than the US and Japan, adding that they must address their public finances.
No related posts.