Weekly US$ rates and comments - week commencing 20th July 2009

Sterling continued on what has been a frustrating and rather uneventful past fortnight and traded in a relatively narrow range against most major currencies including the US$ and the euro. UK Inflation data at the start of the week indicated only what the Bank of England (BoE) has told us to expect over recent months with the target of 2% being undershot marginally. However, a steep rise in unemployment over the month of June kept sterling under pressure throughout the middle of the week with little else in terms of significant market data releases later on in the week. On Friday the International Monetary Fund (IMF) compounded matters for sterling with comments regarding the vulnerability of the UK economy due to its dependence on the fragile and publicly supported financial sector. Green shoots are simply not enough for sterling at the moment. This week's key economic data is as follows. On Tuesday the public sector net borrowing figure for June is expected to exceed £20bn and then on Friday we have the preliminary second quarter gross product figure which is expected to show a fall of over 5%. Shocking figures but given the fallout over the last 12 months it is very difficult to surprise anyone now.  The only positive is thought to be the release of June figures for house purchase loans which is expected to show a significant increase.

 

 

The US$, which is sitting at just over US$1.64/£1 inter bank, lost marginal ground through the week against sterling and the euro, thanks to a mixed bag of market data releases. US industrial production figures disappointed but an improvement in retail sales (largely supported by the recent rise in the price of oil) kept the US$ treading water and minimising losses. This was all in spite of an improvement business sentiment and risk appetite, which would usually see the US$ make more substantial losses, generated by a positive run in global equity markets with most attention going to the surprisingly large profits of companies such as JP Morgan.  This week the US Federal Reserve Chairman makes his semi annual statement to the US government. I am sure every word will be poured over to see how he sees the recovery from the recession is progressing.