Analysis / Daily / Finance / forex

Global Markets Splutter

One Pound

Sterling eased against the dollar on Friday, its weakest weekly performance in three, after recent data disappointed and falling oil prices raised some doubts over when the Bank of England would hike interest rates. Sterling dropped to $1.5485, down 0.2 percent on the day, having hit $1.5469 earlier in the day — its lowest in 10 days. It has retreated from last Friday’s high of $1.5673 when it was underpinned by indications that the BoE was edging towards a rate rise in coming months. Last week, Governor Mark Carney suggested rates could begin to rise around the turn of year while monetary policy committee member David Miles, once one of the strongest advocates for providing more stimulus, said in an interview published this week that the time for a hike was nearing. On Thursday, British retail sales for June disappointed, but some analysts argued it was not enough to deal a blow to hawks on the BoE policy committee, many of whom are probably inching towards voting for a rate hike next month. Societe Generale strategists said the shift in the BoE’s monetary stance towards a slightly more hawkish tone would induce a wider divergence with the European Central bank leaving room for sterling to gain against the euro in the near term. The euro was down 0.2 percent against the pound with the single currency knocked back by data on Friday that showed euro-zone business activity was weaker than expected in July. British gilt prices rose sharply along with other high-rated government bonds, boosted by business surveys suggesting the global economy started the second half on a shaky footing. The 10-year gilt yield fell to its lowest level since July 9 at 1.929 percent, and was last down around 8 basis points on the day at 1.94 percent.

euro

EUR/USD fell slightly on Friday reversing some of the gains from one session earlier, amid mixed data on both continents. The currency pair traded in a tight range between 1.0925 and 1.0996 before settling at 1.0976, down 0.0009 or 0.08%. For the week the euro gained more than 1.3% against its American counterpart, as the Greek Debt Crisis continues to wind down. In Europe, the Markit flash euro zone PMI fell to 53.7 in July, down from a four-year high of 54.2 in June. The decline reflected a slowdown in the manufacturing and service sectors throughout the zone, as well as a dip in consumer confidence.

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The dollar was broadly higher against the other major currencies on Friday as the commodity linked currencies weakened after soft Chinese factory data fueled fears over slackening demand for raw materials. The U.S. Dollar Index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was at 97.34 in late trade, paring the week’s losses to 0.65%. on the U.S., data on Friday showed that new home sales fell to a seven-month low in June, while another report showed that manufacturing activity edged higher this month. The Commerce Department reported that sales of new homes fell 6.8% last month, to an annual rate of 482,000 units, the lowest level since November. May’s figure was revised down to 517,000 units from the previously reported 546,000 units. A separate report showed that the Markit manufacturing PMI  ticked up to 53.8 this month from 53.6 in June, which was the slowest pace since October 2013. On Friday, the Fed mistakenly published a staff projection pointing to a quarter point rate hike later this year. The dollar has been boosted by expectations that the U.S. central bank could raise rates as soon as September if the economy continues to improve as expected. The U.S. is to publish an initial estimate on second quarter growth on Thursday

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