Hold your breath until tomorrows budget
In contrast to the poor results for the major Eurozone nations in the World cup, the general sentiment in the markets has improved for the Euro which has allowed it to push up against the Dollar and sit above 1.24. The Euro has not made the same amount of gains against the Pound which has managed to hold onto levels above 1.19, although tomorrow’s budget is likely to alter that somewhat.
The ECB issuing the results of the banking stress test, along with successful bond auction for a couple of the under pressure nations, have helped shore up the Euro, although it’s rise against the Dollar has been helped along by a rise in general sentiment as the news that China is going to allow the Yuan (CNY) to float. The announcement comes ahead of the upcoming G20 conference and the regular US report on the FX strategies of other countries, which may have designated the Chinese government as ‘currency manipulators’ (which they clearly are). The move is unlikely to make much difference in the USD/CNY rate in the immediate future, and the Chinese government are unlikely to allow the rate to move much in the medium term, but the news has still been welcomed and the usual rise in risk appetite has pushed the Dollar down, allowing the Pound to push up towards 1.49 over the weekend.
All eyes in the UK will be on tomorrow’s budget, with the Chancellor promising the pain will be spread around, and also promising that the budget will be a long term strategy covering the life of the parliament, rather than just the next 12 months. There is nothing else released for the UK before then, and nothing for anyone else today either, so the Pound is likely to stay rangebound up to tomorrow’s big announcement.
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