Euro continues to fly high

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Financial markets closed out the week strongly on Friday with a green sweep across the board for all the big European and US markets. Eurozone confidence was more upbeat and the US had all but closed the door on QE for the near future, settling nerves in the short term.

Similarly to the way Christmas dinner tastes better on the second day, apparently so does Mario Draghi’s comments. After assuring that the ECB would do whatever it takes on Thursday, the single currency enjoyed an uncharacteristic successive day of strengthening. Germany announced on Friday that it would stand in the way of the ECB if it decided to intervene with its bond buying programme. This gave EUR the extra push it needed to see it rally harder. The Spanish IBEX and Italian MIB rose by 6%, yields fell under 7% and 6% respectively and GBPEUR dropped to the low 1.26’s with EURUSD rocketing up to 1.24.

The US markets started slowly but after the better than expected payroll figures in the early afternoon they found their feet over the last 30 metres to win the 100m in 9.53sec. I may be confusing the US markets with Usain Bolt. The US managed to add 163k jobs in July well up from 64k the month previously. The improvement was still a far cry from the stronger numbers we were seeing at the turn of the year and consequently unemployment stepped up a notch to 8.3%. A movement that will not be welcomed by President Obama with election fever building. Job creation for August will be crucial as sustained growth will be needed to tackle unemployment at keep QE in the war chest.

The gains that EUR made last week are to be taken with a pinch of salt. The debt and funding situation in Spanish peripheral regions continues. The elusive 11.5bn EUR worth of cuts that the Greeks have to find still remains the white elephant in the room for the EZ. Italian Q2 GDP on Tuesday followed by UK retail sales will undoubtedly rock the boat further.

Along with retail sales, UK inflation, industrial production and trade figures are all out this week. With the recent GDP figures still in mind, further contract in expected to emanate across the board.

Good Luck

Latest exchange rates at time of writing

Indicative Rates Sell Buy
GBPEUR 1.2610 1.2635
GBPUSD 1.5610 1.5635
EURUSD 1.2350 1.2350
GBPJPY 122.10 122.35
GBPAUD 1.4776 1.4805
GBPNZD 1.9090 1.9116
GBPCAD 1.5605 1.5635
NZDUSD 0.8153 0.8180
GBPZAR 12.7140 12.7608
USDZAR 8.1540 8.1940
GBPPLN 5.1060 5.1320
EURJPY 96.66 96.92

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