Global equity markets were subjected to sharp selling pressure

EUR/USD

The Euro was unable to push back above 1.23 against the dollar in early Europe on Wednesday and was then subjected to renewed selling pressure during the day.

The Euro-zone capital markets and banking sector remained an important focus during the day. There were fears that banks would find it difficult to roll-over US$540bn in loans which are due during the current week, with particular fears surrounding Spanish loans. High demand for ECB funds at Wednesday’s tender would suggest an escalation in underlying stresses.

There was also further evidence of underlying capital flows out of Euro-zone bond markets due to structural concerns and fears that this would eventually put the Euro under renewed selling pressure.

The US consumer confidence data was significantly weaker than expected with a decline to 52.9 for June from a revised 62.7 previously as the expectations component weakened sharply while optimism surrounding the jobs market also faded. This decline will reinforce fears that the economy will deteriorate during the second half of 2010. The housing data was slightly more encouraging with the Case-Shiller index rising 3.8% in the year to April.

Global equity markets were subjected to sharp selling pressure and the decline in risk appetite also put the Euro under pressure with lows near 1.2150 as there was some defensive dollar demand. The Euro did find support at lower levels with speculation of Middle East Euro buying.

Source: VantagePoint Intermarket Analysis Software

Call now and you will be provided with FREE recent forecasts
that are up to 86% accurate * 800-732-5407
If you would rather have the recent forecasts sent to you, please go here

Yen

Confidence in the global economy was weaker on Tuesday with doubts over the US outlook compounded by fears over a slowdown in China and the wider Asian economy. The commodity currencies also maintained a significantly weaker tone which stifled carry trade interest and yen selling pressure.

In contrast to the previous day, the domestic data offered no support to the yen with a small monthly decline in industrial production while unemployment rose to 5.2% and this will tend to limit yen support to some extent. Risk conditions were still dominant and the dollar dipped to renewed 5-week lows near 88.60 in Asian trading.

Risk appetite deteriorated further following a sharp downward correction to China’s leading-indicator reading which maintained underlying buying support for the yen. The dollar dipped to lows near 88.25 before correcting slightly stronger as there was speculation over semi-official dollar buying at lower levels.

Sterling

The UK currency hit selling pressure above 1.51 against the dollar on Tuesday and retreated steadily during the European session. International trends were of primary importance and Sterling was unsettled by a deterioration in risk appetite, especially as the FTSE stock-market index weakened to below the important 5000 level.

If confidence in financial markets remains weaker, there will be fresh doubts over the possibility of an interest rate increase. Sterling will also be vulnerable to renewed selling pressure if there is any evidence of renewed stresses within the banking sector. There will continue to be some important degree of protection from a lack of confidence in the Euro-zone economy.

The domestic consumer lending data was stronger than expected which provided some degree of optimism over future spending, but monetary aggregate growth was still very weak which suggests that underlying loan demand within the economy is still depressed.

Sterling found support close to 1.50 against the dollar and pushed back towards 1.51 during the US session as the UK currency pushed to a fresh 19-month high against the Euro. 

Swiss franc

The dollar edged higher in European trading on Tuesday, but was unable to strengthen above the 1.09 level and retreated to lows near 1.08 during the New York session. The franc retained a very firm tone on the crosses which provided a further barrier to dollar gains.

The franc continued to gain support from safe-haven demand as underlying confidence in the Euro-zone remained very weak with the Euro weakening to below 1.32.

The National Bank continued to downplay the deflation risks and also suggested that it would raise interest rates if there was any sign of inflationary pressure.

Source: VantagePoint Intermarket Analysis Software

Call now and you will be provided with FREE recent forecasts
that are up to 86% accurate * 800-732-5407
If you would rather have the recent forecasts sent to you, please go here

Australian dollar

There was considerable selling pressure in Asian trading on Tuesday with lows below 0.86 against the US dollar. The currency was undermined by further weak new Zealand data which curbed optimism surrounding the regional economy. There was also a deterioration in risk appetite as Chinese equity markets fell sharply which substantially curbed appetite for carry trades.

The currency was unable to regain ground during the European session and dipped further to lows near the 0.85 level as Wall Street opened with sharp losses. Underlying confidence is liable to remain weaker in the short term, especially with commodity prices generally weaker.