Analysis / Daily / Finance / forex

Mark Flashes Some Ankle – Traders Swoon

One Pound

Sterling gained around half a percent against both the dollar and the euro on Tuesday after Bank of England Governor Mark Carney warned a first rise in interest rates since the 2008 financial crash was getting closer. A decline by the dollar after a U.S. retail sales report also helped sterling. But it was the UK economic outlook that dominated the day’s trade after morning inflation numbers. The pound rose 0.6 percent to $1.5582, after rising above $1.56 mid-session. Against the euro, it rose roughly 0.5 percent to 70.71 pence. Carney also played down any influence sterling’s gains against a basket of currencies over the past two years has had on monetary policy, saying it was “not the dominant factor” for inflation. He also pointed to risks from market and economic turbulence in China. The euro zone’s problems with Greece have been forcing back expectations for the BoE’s first move in the past few weeks, and any move by the bank appears to depend on the overall picture for global growth. Weak retail sales numbers out of the U.S. bode ill on that front. UK numbers showed consumer prices were flat in June after nudging up in May, as food and summer clothing prices fell. An underlying measure of inflation, which strips out energy, food, alcohol and tobacco prices, also fell to its joint lowest level since March 2001, suggesting cheaper oil is affecting the cost of other goods and services. The market seemed to resist that message, though. Carney has said prices are likely to pick up later this year as 2014’s plunge in global oil prices works itself out of the numbers, and for inflation to return to around its 2 percent target by early 2017.

euro

The euro opened in Asia at $1.1009, and early trading was subdued, confining euro-dollar to a narrow $1.1006 to $1.1017 range. The focus was on whether Greece’s Tsipras can get approval through parliament on the latest round of austerity measures. Selling pressure appeared after the IMF published a report in which it called Greece’s debt “highly unsustainable,” and expected to peak at close to 200% of GDP in the next two years. Euro-dollar broke below the early $1.1006 low after Japanese stocks opened, and it then spent a few hours near a session low of $1.0991. It recovered marginally to $1.1007 after the better-than-expected China GDP data but gains have been relatively modest. Euro-dollar last traded at $1.1000 heading toward the European open.

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The dollar was flat against the yen and the euro in Asian sessions today, with investors reluctant to take lopsided trading positions ahead of a busy day of market-moving events including Federal Reserve Chairwoman Janet Yellen’s semi annual monetary-policy testimony. At around 05:50 this morning, the greenback as at Y123.40, compared with Y123.39 late Tuesday in New York. The U.S. Dollar Index, a measure of the dollar against a basket of major currencies, was up 0.01% at 87.59. The dollar also maintained stability after China’s slightly-better-than-expected economic growth and the Bank of Japan’s decision to stand pat at its monetary policy meeting. But currency market investors shrugged off these events, as well as comments by a Fed member that a rate increase is imminent. Instead, they sat on the sidelines before her appearance before the House Financial Services Committee later on Wednesday.

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