The markets had an optimistic start yesterday, buoyed with the positive news that France and Germany posted positive Q2 GDP numbers at +0.3% respectively. The news rallied the markets with sterling and the euro both making some gains against the USD; the FTSE also hit a 10 month high. GBP/USD made a move back above 1.66 and EUR/USD to 1.43 as appetite increased. The mood changed in later trading as US data came in weaker than expected. US retail sales posted lower at -0.1% and weekly jobless claims rose by 4,000 swinging the market back into more caution with USD gaining back.
Overnight the cautious mood was reflective in the Shanghai index which fell 3% and just after 8:00 am this morning GBP/USD dropped 75 pips down to 1.65. With little data today I would expect to see markets led by equities and in all probability no significant breaks with GBP/USD in the 1.65’s and EUR/USD between 1.4250-1.43.
Last night we had a 50 basis point cut in interest rates in South Africa down to 7%, also the Reserve Bank of Australia affirmed that they will look to raise interest rates when economically viable. This has added more strength to the AUD versus the USD and sterling; GBP/AUD is now just over 1.96 bringing us back to 1997 lows.
