Today's Highlights
- Euro turmoil remains main talking point
- US Dollar and Sterling benefit from market fears
- Queen’s Speech awaited
FX Market Overview
Now I am not praising the online troll phenomenon that blights the interweb these days but I found it reassuringly ironic that Facebook stopped the broadcast of its pre-share offering video because the company’s owner and messiah Mark Zuckerberg, was teased for wearing odd makeup during the shoot. What Mark!...people being nasty online! Who would have thought it was possible. Perhaps there should be some rules in place to stop that kind of thing....on Facebook maybe.
Anyway, back in the real world, Australia’s government recommitted itself to running a budget deficit within the year through a combination of the cancellation of corporate tax cuts and the implementation of spending cuts elsewhere. That didn’t stop the Australian Dollar losing ground though as fears over the Eurozone’s political turmoil caused a flow of funds away from higher yielding but higher risk assets and into the safety of the US Dollar, Swiss Franc and Sterling. In the bigger picture, Australia’s underlying economic strength may, in time, allow the Aussie Dollar to reverse those gains but for now we have to assume further strife in Europe and more of a ‘safety first’ attitude amongst international investors.
Tuesday was a public holiday in France so the markets were a little lacklustre but the themes were clear. The impasse in Greece and the uncertainty over the new French President’s plans are causing major concerns. We have had a few warning shots from Germany that there can be no renegotiation of the Financial support plans for Greece and elsewhere but I am not sure President Hollande has ears for that just yet. Germany’s Chancellor, Angela Merkel says she will greet the new French President with open arms; perhaps it is churlish to suggest that an open armed posture leaves your hands free to crack a whip. With a very thin data diary yesterday and today, the currency markets are likely to be rumour driven so expect a bit of ‘headless chicken’ trading. At the moment though, the inability of Greece’s newly elected MPs to form a government is a major worry and has prompted a number of articles declaring - with utter certainty - that Greece will exit the Euro. I am not quite so certain but it would appear to be the most logical conclusion to the events of recent weeks and it would seem to be in line with the ‘anti-austerity’ and ‘anti German control’ tone of the election results.
Sterling started the week with purpose; reaching multi-month highs against many currencies. The drubbing that the Conservatives and Lib-Dems took in the local elections seem to have been largely ignored by the markets; Britain’s position on the outskirts f the European area and the slightly more encouraging recent data seem to afford the Pound a degree of safe haven status in traders’ and investors’ perceptions. Today’s Queen’s speech has been almost entirely leaked but we will look for any details on economic growth plans. If it is well received, further Sterling strength is very likely.
The US Dollar is also benefitting from a flight to safety by investors escaping the Eurozone drama. In fact, the Euro - US Dollar exchange rate has fallen back 62% of the distance it rose since the start of the year. A break below €1.2950 would set up a more substantial fall; perhaps back to the 1.27 levels seen in mid-January.
And finally, heroic Claire Lomas and her amazing bionic suit finished the London Marathon yesterday; more than 16 days after starting. As she did not finish on the day, she was not entitled to an official medal but, upon hearing of her astonishing guts and bravery, many medals have been donated by other marathon runners. So, as well as a welcoming crowd and after raising £90,000 for spinal injury research, Claire did get a medal after all. I have to wonder though why the organisers have not minted a special medal for the outstanding effort of this inspiring woman.
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