Forex News Update

• Risk appetite remains- US Q2 GDP data slightly better than expected

• Corporate earnings continue to post positive numbers boosting equities

• Yen and dollar still under pressure as safe haven currencies are sold off

• Oil ticks higher at $70.05 per barrel as dollar continues to fall

US Dollar:

The ongoing corporate reporting season is still in full swing which has seen a strong sell off in the value of the dollar. This was onfounded by a slightly better than expected Q2 GDP number from the US on Friday afternoon, which kept the lights firmly green for players to stay aboard the risk appetite train. Falling US long-term interest rates and concerns over the US consumer spending are continuing to weigh heavily on the greenback.

The buck saw continued selling against both the pound and euro which has continued into this mornings session.

The dollar has now hit a nine month low against the pound to trade at $1.6778, pulling back only slightly since that low at 08.00. Against the euro there was a two month low hit at $1.4307 in early Asian trade, but this has come back slightly in the dollars favour as Asian players took profits and sold off the single currency. EUR/USD has now recovered slightly to hit $1.4230.

Data 15.00: ISM Manufacturing 46.5 from 44.8 & Construction Spending MoM –0.6% from –0.9%.

Sterling:

Sterling completed last week on a high as the continuing data for Q2 corporate earnings pushed the pound higher against both the dollar and euro. Even the GDP data for Q2 from the US came in slightly better than expected which helped players remain in a bullish mood with the stock markets. As we have seen of late, the return to positive numbers in the worlds stock markets has meant a sell off for the greenback and a rally in the pound. Cable managed to hit a nine month high of $1.6778 in this mornings trade, before coming off slightly to trade at $1.6742. The pound also managed to rally up on the euro, despite the single currency also benefitting from the return of risk appetite. Sterling hit just over a month high against the euro this morning where GBP/EUR is still trading around the 1.1770 levels. The euro did managed to keep a lid on some of the gains made by sterling, but in Asian trade this morning, there has been some profit taking on the single currency, pushing it down from its highs and leading to the pound rallying higher.

Data 09.30: PMI manufacturing expected 47.8 from 47.0.

Euro:

The battle between the euro and sterling as to who benefits the most form this current dollar move is so far being won by the pound, as both currencies gain from risk appetite remaining in the financial markets and tick higher against the greenback. The euro was managing to hold off the pound from edging ahead too much around the 0.8550 levels, but a move in Asian trade this morning has now seen the euro fall down as Asian players sold the single currency. This has helped push the euro lower on the pound and we are closing in on the 0.85 level. Against the dollar the euro had risen to a two month high as risk appetite pushed the single currency up to $1.4310 during the Asian session, its highest level since June 3rd, but soon gave up those gains as non-Japanese investors took profits.

No data.

General:

• Be aware of interest rate decisions this week in both the Eurozone and the UK. Both central banks are expected to keep interest rates on hold, but it will be the BoE’s move over QE and the press conference by the ECB which will be closely monitored for directional moves in both currencies.

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