Once again, mixed trading and jittery sentiment marks the European session, and undoubtedly the royal currency is the dominant victor in the equation.
Investors are still wary over the prospects for further quantitative easing and monetary easing to stimulating waning growth. The outlook for the global economy remains the cornerstone for investors and the market is fluctuating today following downbeat earnings from Europe, which weighed negatively on equities and on the overall risk appetite.
Nonetheless, amid the dark cloud smothering the market, rays of light did shine in UK skies and sterling emerged strongly after the better than expected data. UK reported 0.8% expansion in the third quarter, double the pace expected which casted further doubt and confusion over investors amid their debate over possibilities for APF expansion next week.
Arch MPC dove Adam Posen argued for the APF increase to £250 billion citing the weak economic outlook and downside pressures on the recovery which will keep inflationary pressures in place. Yet, the data today argues that the pace at which the recovery is losing momentum might be overrated, and if expectations are for further slowdown in the fourth and first quarter of next year is to be witnessed it will be only wise for the BoE to delay their decision on expanding the stimuli next meeting.
Sterling rallied against the dollar striking the strongest today at 1.5893 and hovering around those areas at 1.5877. The pair rallied following the GDP figures after setting the low of 1.5688. With consolidation above 1.5835 the bullishness is likely to remain intact for the rest of the day supported by the upbeat GDP figures.
The British Pound also rallied versus the euro and the Japanese yen which are trading softly today on the back or rising woes once again over the outlook for both nations and expected measures to be taken. The pound versus the yen rallied higher and currently hovering around the highest throughout the session at 128.87 and likely to continue higher; while also the EURGBP also sterling’s appreciation took the pair south hitting the strongest for sterling at 0.8773 and still hovering around those areas.
The market is surely mixed today and jittery, where majors are trading on the course of their own fundamentals rather than a general unified sentiment front. Greenback is flat midday trading around opening levels at 77.17; the index so far recorded the high of 77.38 and the low of 77.03.
For the euro, the weakness was merely limited as weakening risk appetite alongside rising fears once again over the status of indebted nations in the area. Greek bonds slumped today and the yield demanded for holding the 10-year Greek bonds for German bunds rallied again above 7.0%. The spark followed comments from PIMCO CEO Mohamed A. El-Erian saying Greece will likely default in a conference sponsored by the Economist magazine in NY last night.
The euro is trading with gradual bearish tendencies versus the dollar where the pair is currently flat around 1.3948 after recording the high of 1.3981 and the low of 1.3906. The pair is likely to continue to move lower today especially if stability prevailed below 1.4085.
As for the Japanese yen, the currency weakened on fears that Japan might not respect the G20 pledges and intervene again in the market to stem the currency’s rally which is dampening the recovery. Comments from a senior Japanese Finance Ministry official sparked the fear as he said the intervention works most effectively when it’s a “surprise”. Also news of a meeting between Japan’s Chief Cabinet Secretary, Yoshito Sengoku and a senior finance ministry official to discuss the global economy and foreign exchange market added to speculation that Japan might move again unilaterally to weaken its currency.
The yen slipped against its major peers on the news and the USDJPY pair inclined hitting the highest of 81.20 after striking the low of 80.59. The pair is entering overbought areas over intraday momentum indicators, especially over shorter timescales, which signals more volatility to be seen in the session, though stability below 81.35 will likely keep the pair tending lower and accordingly unless the pair stabilizes above those areas it will return to its bearish tendencies once more.