Currency Markets keep ranges

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Euro took a bit of a pasting yesterday once again as a result of a poor peripheral bond auction. Spain managed to get away EUR3bn worth of debt over various maturities, however the yields were massively higher and made sure that the all-important 10yr number moved and stayed above 7%.

There are a couple of things to take from this. Firstly, these are clearly unsustainable in the long term and, given the short-term nature of these auctions, means that pain for Spain will continue through 2020 at least.

Secondly, the market seems to be completely out of love with the measures from the Rajoy government as yields have been increasing ever since the latest austerity measures were voted in.

Thirdly, and perhaps most importantly, the relationship between Italian and Spanish debts has broken down. The periphery is no longer trading as one. Political pressures may soon refocus the spotlight on Rome, but for now it is out of sight and out of mind.

Auctions for the core countries remain fine however, with France managing to get rid of close to EUR9bn over 3, 4 and 5yr maturities all at yields at less than 1% and most at record lows. This divergence is still the main issue in European markets and will be until the ECB acts.

UK retail sales in June were worse than the market expected as it seems that people decided to not spend money during the Jubilee and keep their hands in their pockets until the Olympics. As we know, the weather has been atrocious of late and even though retailers have heavily discounted their clothes to try and get people through the doors, as evidenced in Wednesday’s inflation numbers, this has not brought sales. Hopes that a Q2 bounce back in the UK from the retail sector was already slim but is now non-existent.

Despite all this, and poor US jobs and housing data, everything has remained very much range bound this morning and is likely to stay so through today’s session. There’s a real lack of tier 1 data today and we suspect that nobody is really in the mood to break their backs pushing for outperformance today.

Indicative Rates Sell Buy
GBPEUR 1.2782 1.2812
GBPUSD 1.5683 1.5707
EURUSD 1.2253 1.2276
GBPJPY 123.18 123.45
GBPAUD 1.5064 1.5091
GBPNZD 1.9550 1.9578
GBPCAD 1.5809 1.5838
NZDUSD 0.8012 0.8033
GBPZAR 12.84 12.89
USDZAR 8.1778 8.2123
GBPPLN 5.3168 5.3346
EURJPY 96.23 96.29

Please note these rates are “interbank” rates ie they indicate where the market is currently trading and are not indicative of the rates offered. Rates are dependent on amount transacted. It is important to remember that foreign exchange rates fluctuate all the time. The rate you will receive will depend on the amount and currency you require.

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