FX Market Overview

Yesterday wasn’t exactly awash with data but the data we did see was all significant stuff. Allow me to quickly wiz you around the globe; UK retail sales slumped by 0.6% last month as shoppers chose to keep their cash in their wallets and purses; job security fears are clearly weighing on peoples’ minds. Sterling slipped on the news because it puts a dampener on any notion of a rapid return to higher interest rates and therefore yields remain subdued.
We also had the UK government borrowing and money supply data which is so confused by the various ways that these massive borrowing plans are being accounted for that no one can make head nor tail of the numbers. Suffice to say the government owes a lot. I started counting the Pounds they owe and then I got tired but it is certainly more than 18; trust me.
Canadian inflation is next and it is almost a non story. Retail prices in Canada rose just 0.1% in the year to May but we should remember we are comparing it to a year in which oil and food were rising at rampant paces, so the data is perhaps less dramatic than it appears at first glance.
The afternoon also brought US jobless claims which rose slightly for the 1st time in 5 weeks but thankfully the overall level of continuing claims is still slightly declining. We also had the Philadelphia Fed’s business sentiment index which was far better than forecast. The reading was minus 22.6 in May but spiked back up to just minus 2.2 in June. That still reflects a slight tone of pessimism amongst business in the Philly area but they are far less depressed than last month and that is good for the US Dollar. No surprise then that the Dollar is a tad stronger this morning than it was this time yesterday.
Oddly enough, if the International Monetary Fund had displayed significant confidence a few weeks ago, the US Dollar would have weakened through the vast amount of US Treasuries being sold as investors stampeded into higher yielding currencies but, speaking in Turkey yesterday, the IMF’s First Deputy Managing Director, John Lipsky, said the IMF would be revising its 2010 growth forecasts upward as they were already seeing the pace of global economic decline slowing. Let’s all hope they are right.
Today is largely devoid of data so that void is most likely to be filled with rumour and speculation; thus we can expect a very lively last day of the week. Have a good day using that volatility to your advantage. And as we approach Fathers day in Britain (hands up all those who are now frantically Googling Moonpig), I hope your relationship with your dad is better than that of William Ireland of Atherstone who is so angry about his dad abandoning him and his mum when he was a child that he is selling his father’s ashes on eBay. Quite who might buy the ashes of someone they never met is the question, although the family that William’s dad established after he left home did get everything in the will, so maybe they’ll be the highest bidders. I wonder what the reserve is; I don’t want the ashes but it is a very nice Urn.
And on that slightly macabre note, I’ll wish you a very happy weekend but perhaps I can recover the mood of father’s day with a few good quotes.