US markets managed to scrape together another day of gains after the strong numbers from Intel overnight remained enough to keep the major indices in the black.

However earlier in the day the good feeling over earnings seemed to fade in Europe as the major indices decided that the strong performance was already factored in to the markets.

It was the banking stocks that took the hit yesterday and with the stress test results approaching over the next week or so the potential for nervous markets is very much in place.

The economic calendar gets a little quieter in the UK today but it will be earnings season in the US that takes centre stage.

Today sees earnings from real heavyweights such as Google and JP Morgan, both of which will provide a real test to the positive sentiment that has been reverberating around the markets for the last 7 sessions.

BP could also be in the spotlight yet again tomorrow as some US officials call for an enquiry into the company’s role in the release of the Lockerbie bomber as there ties with Libya are probed further.

This morning could see us start on another more negative after the FOMC minutes showed the Fed are downgrading there GDP forecasts. This will yet again bring in the question of the strength of the US economic recovery.

Global information services company Experian, best known for its credit checking facilities, issues an interim management statement on Thursday. The company’s chairman, John Peace, said in May that the company had seen “signs of gradual recovery in some of our key markets and we expect a modest contribution from our strategic growth initiatives over the course of the year.” Revenue in the UK & Ireland has gone ex-growth recently but Latin America has been going great guns, and it is little wonder that the company is keen to deepen its presence in emerging markets such as Brazil, India, China , South Africa and Eastern Europe.

So overall this morning could be a rather negative start and with some heavyweight earnings and more US economic data we could well be in for a pretty mixed bag as the day moves on. Ahead of the open we are expecting the FTSE to open down 10 points, the DAX down 13 points, the CAC down 16 points and the ISEQ down 12 points.

CFDs, FX and Spread Trading are leveraged products. They carry a high level of risk to your capital and it is possible to lose more than your initial investment. These products may not be suitable for all investors. Ensure you understand the risks involved and seek independent advice if and where necessary.

Trading News from Michael Hewson, Analyst, CMC Markets.

CMC Markets is authorised and regulated in the UK by the Financial Services Authority (FSA). FSA Registration no. 173730.

Note that CMC Markets provide an execution-only service. Any CMC Markets research and charting tools are indicative – they are provided for information purposes – they must not be relied upon as investment advice.

The above material should not be construed as a recommendation or offer to buy or offer to sell or solicitation of any offer to buy any security or other financial instrument by CMC Markets. The material is not a recommendation. You should seek independent advice as to a) your suitability to speculate in any related markets b) your ability to assume the associated risks c) the legal, tax and accounting characteristics and consequences of any transaction.

Strong Australian employment figures send AUD higher.

After a one-cent rally, sterling spent the remainder of the week on the retreat. Its low came as London opened this morning.

A mostly low-key week for the Australian dollar brought a worthwhile improvement in Australia’s trade surplus and a fall in the AiG performance of construction index. The Reserve Bank of Australia stuck to its 4.5% cash rate for another month. In its statement the RBA stopped short of hinting at another no-change decision next month but said nothing to suggest it was in any hurry to take rates higher.

The highlight of the week was Thursday’s employment report. The unemployment rate fell from 5.2% to 5.1% in June with the addition of 46k jobs. Both figures were ahead of investors’ expectations; the change in employment was three times as strong as anyone had bargained for. Although part time jobs accounted for well over half the number of full time workers went up by more than the entire (full- and part-time) increase that analysts had predicted.

The Australian dollar jumped nearly a cent higher against the NZ and US dollars. The interpretation was that a strong jobs market would increase the pressure on the RBA to press ahead with higher interest rates.

As usual markets fluctuation were also clearly seen in the financial spread trading markets.

QSBO shows New Zealand firms still optimistic but less so than three months ago.

After a half-cent rally, sterling spent the remainder of the week on the retreat. Its low came as London opened this morning.

Other than credit card spending, which expanded by +0.4% for a second month, the sole noteworthy economic event in New Zealand was the publication of the Quarterly Survey of Business Opinion.

Its results were not stunning but did point to a sustainably-paced recovery. The reading for companies’ outlook for their own business came in at 16%, down from the 19% of three months ago but very slightly higher than the long term average of 15%.

The same firms were more upbeat about business conditions in general, producing a reading of 28%, but that too was down on the first quarter. One aspect of the survey that will interest the Reserve Bank of New Zealand was the expectations for pricing.

More than a third of companies expect their costs to go up in the next three months and two fifths of them intend to raise the prices they charge their customers.

Strong employment data send Loonie higher.

Already a cent down on the previous week’s high, sterling was soon on the retreat. On Friday morning it was down and it fell off a two-cent cliff that lunchtime. The low came this morning when it opened in London.

The Canadian dollar ticked over through a disappointing -10.8% monthly fall in building permits, a very disappointing four-point fall in the Ivey PMI, from 62.7 to 58.9 and an in-line 0.3% increase in the new housing price index. Though not, on average, particularly impressive the numbers were enough to keep the Loonie in touch with the other commodity dollars.

In a week that saw rises of 5% on the American Dow Jones Industrial Average and a 6% rise for the FTSE 100 investors were well-disposed to the currencies best placed to benefit from an improving global economy.

What really made the difference was Friday’s employment data.

The Loonie leapt an instant cent higher against its US neighbour after Canada’s unemployment rate fell from 8.1% to 7.9% and the monthly net change in employment hit +93k. Prior to the announcement no alteration had been expected to the overall level of unemployment and the change in employment had been pencilled in at +18k.

An increase in the participation rate from 67.4 from 67.3 removed any suspicion that the falling rate of unemployment was simply the result of people dropping out of the labour market (as it has been in the UK and the US). The figures were so much stronger than expected that it was an easy choice for investors to buy the Loonie on the news.

For more information and expert guidance on the currency markets, call Moneycorp today on +44 (0)20 7589 3000. Alternatively go to www.moneycorp.com where you can open a free, no obligation Trading Facility.

The pound had a bit of a choppy ride yesterday after worse than expected current account data saw the pound weaken in the morning before recovering in the afternoon when ratings agency Standard and Poors waded in saying that while the UK had preserved its triple AAA rating for now it was still on negative watch due to concerns that future growth projections were too optimistic, and that political risks could prejudice the plans to cut back on spending in the short and medium term.

The economic data keeps on coming for the pound today with the release of inflation data for the month of June. Coming as it does against a backdrop of recent weak data; any further weakness is likely to pressure the pound even further.

This data is expected to reinforce the Bank of England’s often repeated view that consumer price inflation is starting to moderate, falling to 3.2%, from 3.4%, year on year and translate into lower inflation by year end. The month on month figure is expected to come in flat at 0.0%.

However, of the two inflation measures, the main focus will be on the retail price index which has been the more stubbornly sticky of the two, where economists expect the index to fall under the psychologically important year on year 5% level for the first time in 3 months, from the May figure of 5.1%. The month on month figure is expected to slip to 0.1% from May’s 0.4%.

If this proves to be the case then Andrew Sentance the one committee member to vote for a rate hike in May could well be proved to be premature in his desire to raise rates.

In the US the May trade balance figures are due out with a deficit of $39.2bn expected as the recent strength of the US dollar hits the value of American exports.

In Asia today concern about China’s property market saw risk appetite slip back and equity markets decline after the Chinese government reaffirmed an earlier commitment to curb its runaway property prices, as it seeks to normalise its monetary policy in order to stabilise and smooth out economic growth.

EURUSD – the down trend line from the 1.5142 highs in December last year, has continued to contain the recent rally in the single currency. This resistance level now sits around the 1.2700 area. A break of last week’s highs as well as 1.2750 would target a move towards 1.3000.

The current stretched momentum has seen the euro drift back towards the support around 1.2550, a break of which would re-target last weeks lows around 1.2480. To continue the upward momentum of recent days these lower support levels need to hold to push above last weeks highs.

GBPUSD – yesterday’s poor current account data has kept a lid on the pound and it has yet to break back above the 1.5080 level, its previous support level. While below the 1.5080/90 resistance area pressure will continue to build up on the downside.

While this is the case we could well see a retest of yesterday’s lows at 1.4950 on the way to target a test towards the 1.4850/80 area.

Above 1.5080/90 re-targets 1.5230/50.

EURGBP – a brief spill over to 0.8420 yesterday ultimately proved unsustainable as the single currency slipped quickly back below 0.8400, posting a low of 0.8340 before rebounding.

While the euro continues to hold below the old June 2009 lows around 0.8400, then the bearish scenario remains intact but only just at the moment. The euro should find support around the 0.8320/30 area.

USDJPY stuck in a range between support around 88.00 and yesterday’s highs around 89.15/20 the recent political instability won’t help the yens cause. The risk remains for yen weakness and a re-test towards 89.20, a break of which would re-target the 90.00 area. A drop back below the 88.00 level would re-target the downside risk of a move back towards 86.80.

CFDs, FX and Spread Trading are leveraged products. They carry a high level of risk to your capital and it is possible to lose more than your initial investment. These products may not be suitable for all investors. Ensure you understand the risks involved and seek independent advice if and where necessary.

Trading News from Michael Hewson, Analyst, CMC Markets.

CMC Markets is authorised and regulated in the UK by the Financial Services Authority (FSA). FSA Registration no. 173730.

Note that CMC Markets provide an execution-only service. Any CMC Markets research and charting tools are indicative – they are provided for information purposes – they must not be relied upon as investment advice.

The above material should not be construed as a recommendation or offer to buy or offer to sell or solicitation of any offer to buy any security or other financial instrument by CMC Markets. The material is not a recommendation. You should seek independent advice as to a) your suitability to speculate in any related markets b) your ability to assume the associated risks c) the legal, tax and accounting characteristics and consequences of any transaction.

With US earning season set to kick-off tonight with the publication of aluminium giant Alcoa’s results, European equity markets have continued where they left off last week with BP leading the London market higher as it continues to rally on hopes that the ill fated Macondo Well may well be capped by the end of this week, if a pressure test scheduled for later today is a success.

The shares hit 400p today for the first time since early June.

The share price has also been boosted in the face of possible bid speculation from its North American competitors Exxon Mobil and Chevron.

BP has spent the last week or so seeking to defend itself from such hostile approaches, and is apparently gearing up for a possible defence by disposing of some of its assets including its stake in the Prudhoe Bay oilfield in Alaska to Apache Corporation, for around $12bn, as well as some assets in Latin America.

UK Banks have also turned slightly higher as concern about them failing the European stress tests continues to ebb away.

The worst performers of the day are amongst the mining sector with Rio Tinto and BHP Billiton suffering after China reported declining copper imports for the third straight month in succession.

In economic data released today sterling was sold off, hitting its lowest levels against the Euro for a month, after Q1 current account figures came in much worse than expected at -£9.6bn, prompting fears that the lower value of the pound is not having the desired effect with respect to exports growth.

Final Q1 GDP came in pretty much as expected at +0.3%, which given the speculation over the delay to the release of the figures was a little bit of a surprise.

However the pound was able to bounce back later in the afternoon as the single currency gave up some of its recent gains as fears resurfaced that the European banking stress tests will be in no way rigorous enough.

US markets have drifted between positive and negative territory after the gains of the past few days, as investors sit on their hands and await the start of Q2 earnings season after the bell tonight. Alcoa is expected to post earnings of around $0.19c returning to profit after last years loss.

There is a sense that last weeks gains could well have front run this earnings season and any disappointments could well see corrective moves lower in the short term.

CFDs, FX and Spread Trading are leveraged products. They carry a high level of risk to your capital and it is possible to lose more than your initial investment. These products may not be suitable for all investors. Ensure you understand the risks involved and seek independent advice if and where necessary.

Trading News from Michael Hewson, Analyst, CMC Markets.

CMC Markets is authorised and regulated in the UK by the Financial Services Authority (FSA). FSA Registration no. 173730.

Note that CMC Markets provide an execution-only service. Any CMC Markets research and charting tools are indicative – they are provided for information purposes – they must not be relied upon as investment advice.

The above material should not be construed as a recommendation or offer to buy or offer to sell or solicitation of any offer to buy any security or other financial instrument by CMC Markets. The material is not a recommendation. You should seek independent advice as to a) your suitability to speculate in any related markets b) your ability to assume the associated risks c) the legal, tax and accounting characteristics and consequences of any transaction.

The Euro has continued its recent surge higher on the back of renewed optimism about the banking system, and the outcome of the forthcoming European stress tests, but also on the back of a significant recovery in both German imports and exports for May.

The European Central Bank also sounded a cautiously upbeat note on recovery as both it and the Bank of England left monetary policy unchanged yesterday, which was no surprise, but there is some concern that UK rates may be susceptible to upward pressure, if UK inflation figures due out next week remain “sticky”.

Today’s release of UK Producer Prices input and output prices for June may give some clues as to the extent of inflationary pressures building up in the UK economy and manufacturers willingness to pass increases in costs down through the supply chain.

Today’s release of the UK total trade balance for May is expected to show a deficit of £3bn. With the weaker pound the expectation is for exports to improve, but there is the possibility that the recent weakness in the euro could well hinder this expectation.

Yesterday the International Monetary Fund released its quarterly report on global growth estimates and revised it upwards by 0.5% to 4.6% and this has sparked further invigoration of risk appetite.

The IMF did express concerns about Europe’s debt problems and whether they could well spill over to other regions and stall the global recovery, but they went on to add that a “double-dip is very unlikely”.

Growth forecasts for this year were raised for the US economy by 0.6% to 3.3%, while Germany and other European nations were left unchanged at 1%. The UK’s forecast was revised downward by 0.1% to 1.2%., as a result of the measures brought in by the government to rein in spending. However despite this optimistic outlook the report went onto say “that downside risks have risen sharply”, which sort of begs the question why change the forecasts in the first place?

EURUSD – despite a dip towards 1.2550 on Wednesday the euro remains stubbornly well supported due to current dollar weakness and continues to make marginal new highs towards the long term trend line 1.2730. This recent rally in the Euro looks set to test the down trend line resistance from the 1.5142 highs in December, which comes in at the 1.2730/50 level. A break of 1.2750 would target a move towards 1.3000.

The 50 day moving average around the 1.2430 level remains the key support area and this area needs to hold for further upside to be forthcoming.

GBPUSD – the pound continues to find the air thin anywhere near its recent highs and the resistance around the 1.5230/50 area. This inability to follow through is a concern as it continues to range trade between its recent highs and the support of the last 3 days around 1.5080.

A break below these lows could well yield up a deeper test towards 1.4980, while a break above 1.5250 targets the key resistance levels around the 50% retracement level of the 1.6460-1.4230 down move at 1.5345, as well as trend line resistance from the November 2009 highs at 1.6880 which now comes in around the same level.

EURGBP – the single currency continues to maintain its recent gains managing to hold above the 0.8300 level and continuing to make new highs 2 week highs. A break below 0.8280 is needed to re-target the downside and the 0.8170 level. While the key level on the topside remains around the old June 2009 lows around 0.8400. This was the long term support, the break of which targeted the move below 0.8170 last month.

USDJPY – the dollar has managed to stay above the 88.00 area. While it does so we should see a move back towards 89.20. A drop back below the 88.00 level would re-target the downside risk of a move back towards 86.80.

CFDs, FX and Spread Trading are leveraged products. They carry a high level of risk to your capital and it is possible to lose more than your initial investment. These products may not be suitable for all investors. Ensure you understand the risks involved and seek independent advice if and where necessary.

Trading News from Michael Hewson, Analyst, CMC Markets.

CMC Markets is authorised and regulated in the UK by the Financial Services Authority (FSA). FSA Registration no. 173730.

Note that CMC Markets provide an execution-only service. Any CMC Markets research and charting tools are indicative – they are provided for information purposes – they must not be relied upon as investment advice.

The above material should not be construed as a recommendation or offer to buy or offer to sell or solicitation of any offer to buy any security or other financial instrument by CMC Markets. The material is not a recommendation. You should seek independent advice as to a) your suitability to speculate in any related markets b) your ability to assume the associated risks c) the legal, tax and accounting characteristics and consequences of any transaction.

A recovery in risk appetite yesterday saw the US dollar continue to come under pressure across the board as it fell to its lowest level against a basket of currencies since early May.

This pressure intensified after the release of further economic data fell short of analysts forecasts. ISM Non-Manufacturing data for June came in at 53.8 against an expectation of 55, and not only that the employment part of the index fell below the key 50 level to 49.7. Following on from last week’s poor ISM data the signs point to a significant slow down in the US recovery.

The euro was also helped by news of a successful Spanish government €6bn 10 year bond sale, which was met with healthy demand from overseas as well as at home. This has prompted speculation that maybe Spain’s problems aren’t as bad as they are painted. This month’s bank stress tests could well confirm that one way or the other.

Today the markets should hear about the methodology of one of the stress tests that simulates the impact of a severe economic shock on about 100 banks in the euro zone as well as countries outside it. Already France, Germany, Spain and Austria have stated that everything is fine with their banks, fuelling concern in the markets that the tests won’t be anywhere near rigorous enough.

Sterling was weighed down yesterday by concerns expressed from the British Chamber of Commerce that activity in the services sector remains relatively sluggish and warns that many of the factors supporting growth have been only temporary and the economy faces serious headwinds. Despite the fact that the survey came across as relatively positive it would appear that this could well have already been priced in, hence the rather tepid response.

With little in the way of UK and US data today, it is likely that the markets will focus on the EU GDP revision for Q1 which is expected to be unchanged at 0.6%, and German factory orders for May.

EURUSD – Yesterday’s poor US data has further undermined the dollar and sent the single currency to its highest level in six weeks stopping at the 1.2670 resistance area. This recent rally in the Euro looks set to test the down trend line resistance from the 1.5142 highs in December, which comes in at the 1.2760 level.

The inverse head and shoulders pattern break we saw last week continues to dominate sentiment and the risk remains for further gains while above the 50 day moving average around the 1.2450 level and this area needs to hold for further upside to be forthcoming. The Euro should also find support around the 1.2570/80 area.

GBPUSD – the pounds inability to break above the recent highs and resistance around the 1.5230/50 area is a concern especially given that the Euro has been able to make new highs.

The key resistance levels on the top side remain around the 50% retracement level of the 1.6460-1.4230 down move at 1.5345, as well as trend line resistance from the November 2009 highs at 1.6880 which now comes in around the same level.
Dips should be confined to the interim support area around 1.5080 which has held for the past couple of days. A break below these lows could well yield up a deeper test towards 1.4980.

EURGBP – the lower euro scenario appears to be under threat now we have broken above the resistance around the 0.8320/30 area. We need the June 2009 lows and old support to keep a lid on this short squeeze around 0.8400. This was the long term support, the break of which targeted the move below 0.8170 last month.

Longer term the objective remains for a test towards 0.8000 on the way to 0.7785 over the coming few month’s which is a 61.8% Fibonacci retracement of the 3 and half year up move from 0.6570 to 0.9805.

USDJPY – the 88.00 area continues to cap the dollar and yesterdays poor US data did nothing to help overcome this resistance in that respect. While US yields look weak the yen will continue to gain irrespective of risk appetite. The US dollar looks to be set to head towards 84.80 by way of support around 86.80. A recovery back above 88.20/30 is needed to stabilise the dollar in the short term.

CFDs, FX and Spread Trading are leveraged products. They carry a high level of risk to your capital and it is possible to lose more than your initial investment. These products may not be suitable for all investors. Ensure you understand the risks involved and seek independent advice if and where necessary.

Trading News from Michael Hewson, Analyst, CMC Markets.

CMC Markets is authorised and regulated in the UK by the Financial Services Authority (FSA). FSA Registration no. 173730.

Note that CMC Markets provide an execution-only service. Any CMC Markets research and charting tools are indicative – they are provided for information purposes – they must not be relied upon as investment advice.

The above material should not be construed as a recommendation or offer to buy or offer to sell or solicitation of any offer to buy any security or other financial instrument by CMC Markets. The material is not a recommendation. You should seek independent advice as to a) your suitability to speculate in any related markets b) your ability to assume the associated risks c) the legal, tax and accounting characteristics and consequences of any transaction.

Sterling’s four-yen range was wider than the previous week but proved equally inconclusive. Monday’s high was short-lived. Thursday’s low took longer to play out and was followed by a recovery. The pound opened in London on Monday morning one yen down on the week.

Most of sterling’s achievements last week were more the result of other currencies’ doings than of any effort on its own part, see forex spread trading.

The yen took advantage of nervousness among investors that the global recovery is not all it was cracked up to be. After a couple of weeks of less-than-inspiring economic data from the United States and Europe, the sensation is that austerity measures in the Old World will dampen economic activity elsewhere.

There is even talk of a return to negative growth, the dreaded double-dip recession. The US dollar did not prosper from the worries but the yen was able to take the lead.

Typically, the Japanese economic data had little impact on the proceedings.

The unemployment rate went up from 5.1% to 5.2%, having been expected to fall to 5.0%. Industrial production slowed by 0.1%, pulling the annual rate of increase down from 29.5% to 20.2%. It was a similar story with vehicle production; the annual rate of increase slowed from 50.8% to 30.6%. Housing starts were down as well, by an annualised 4.6%.

Another statistic conveniently ignored by the market was a projection from the IMF that Japan’s budget deficit this year will be close to 10% of gross domestic product (Britain currently 10.1%), taking gross national debt above 225% of GDP (Britain currently 62%).

It still looks as though the market is satisfied with the chancellor’s budget. Investors are once again prepared to treat the pound as a serious currency and to buy it as well as selling it.

For more information and expert guidance on the currency markets, call Moneycorp today on +44 (0)20 7589 3000. Alternatively go to www.moneycorp.com where you can open a free, no obligation Trading Facility.

With the US off for their Independence Day holiday today markets are likely to be a little thin on volume especially in the afternoon.

Despite the relief that Friday’s jobs report was at the lower end of people’s expectations and came in only slightly worse than expected investors are now increasingly anxious that the recent recovery in asset prices is no more than an illusion boosted by governmental fiscal stimulus.

Fears that the US economy could be heading for a double-dip recession have continued to weigh on markets and sentiment was not helped by India’s decision to raise both its repurchase rates by 0.25% on Friday after markets closed.

This action has served as a timely reminder of the need to monitor inflationary pressures in emerging and growing economies in order to prevent overheating. The Reserve Bank of India also indicated that it would act again if the need arose.

Monetary authorities in China, India and Brazil, as the leading growth economies in the world remain concerned about overheating pressures from inflation and any tightening of policy in these economies increases fears that Western economies will find their recovery options limited as they struggle to offset austerity measures with some sort of growth. With this in mind European Central Bank President Trichet urged governments to continue to take steps to rein back on spending and cut their debt.

The Euro continues to remain fairly well supported, building on its recent gains and only slightly below last week’s highs.

Concern remains however about the integrity of the Europe wide bank stress tests currently being carried out by European regulators if, as reported over the weekend by a German newspaper, the stress tests don’t include a sovereign debt scenario. If this were the case it would make them pretty much useless and could well see the single currency drift back down again.

Interest rate meetings from the Reserve Bank of Australia, European Central Bank and Bank of England later this week are expected to keep rates unchanged though the Bank of England meeting could well prove interesting given the recent disagreements between some policy members with respect to a possible rate rise.

EURUSD – the failure to get above the 1.2610 level on a daily close throws into doubt the ability of the single currency to follow through on its break higher last week. While the unexpected break up through 1.2400 has certainly delayed the anticipated move back to the June lows at 1.1880 it certainly hasn’t ruled it out.

The 50 day moving average should act as an area of support around the 1.2480 level needs to hold for further upside to be forthcoming.

The inverse head and shoulders pattern break we saw last week would ordinarily herald a strong move higher; however its break conflicts with a much longer term 5 year monthly break down which could cap the Euro around 1.2780. Next resistance remains around 1.2610, a break of which targets 1.2670.

GBPUSD – Friday’s high of 1.5230 almost met our target of 1.5250 in the short term.

The key resistance levels on the top side remain around the 50% retracement level of the 1.6460-1.4230 down move at 1.5345, as well as trend line resistance from the November 2009 highs at 1.6880 which comes in around 1.5375/80. However momentum is starting to look a little stretched and we could well start to see some sharp drops towards the support zones around 1.5080 and 1.4980.

EURGBP – Friday’s failure to break above 0.8300 keeps the focus on the downside despite the gains of the past few days.

The lower euro scenario continues to remain intact for now while the single currency is able to hold below resistance around the 0.8320/30 area. In the unlikely event of a move above this area the longer term resistance around 0.8400 should cap.

Longer term the objective remains for a test towards 0.8000 on the way to 0.7785 over the coming few month’s which is a 61.8% Fibonacci retracement of the 3 and half year up move from 0.6570 to 0.9805.

USDJPY – continues to look heavy on the back of declining US yields and diminished risk appetite. The US dollar looks to be set to head towards 84.80 by way of support around 86.80. A recovery back above 88.20/30 is needed to stabilise the dollar in the short term for a move back towards 89.00.

CFDs, FX and Spread Trading are leveraged products. They carry a high level of risk to your capital and it is possible to lose more than your initial investment. These products may not be suitable for all investors. Ensure you understand the risks involved and seek independent advice if and where necessary.

Trading News from Michael Hewson, Analyst, CMC Markets.

CMC Markets is authorised and regulated in the UK by the Financial Services Authority (FSA). FSA Registration no. 173730.

Note that CMC Markets provide an execution-only service. Any CMC Markets research and charting tools are indicative – they are provided for information purposes – they must not be relied upon as investment advice.

The above material should not be construed as a recommendation or offer to buy or offer to sell or solicitation of any offer to buy any security or other financial instrument by CMC Markets. The material is not a recommendation. You should seek independent advice as to a) your suitability to speculate in any related markets b) your ability to assume the associated risks c) the legal, tax and accounting characteristics and consequences of any transaction.

Investors are less relaxed about the cost of the US recovery strategy.

There was a setback for sterling, on Monday and early Tuesday, that took it down ahead of the budget speech in parliament. Afterwards it was almost all the way back up. Investors were more enthusiastic this morning, allowing sterling to open in London at its highest level for six weeks.

There was no shortage of statistical evidence from the US economy. Unfortunately, most of it was not particularly helpful. An ongoing theme was weakness in the residential property market.

With the expiry of a tax credit scheme for homebuyers, turnover has fallen off a cliff. Existing home sales fell by 2% in May and new home sales were down by a thumping 32.7% to an all time low (records began in 1963). Durable goods orders were down by 1.1% on the month. Friday’s revised figures for gross domestic product in the first three months of the year were another disappointment. Annualised growth of +2.7% was appreciably less than the previous +3.0% estimate.

Although the US dollar is still the world’s primary reserve currency investors are beginning to express concern at the president’s compulsion to chase growth almost at any cost.

If the squillions already spent have not been enough to generate trend-line growth, how much more money might Mr Obama be persuaded to print in pursuit of prosperity? Advocates of the Obama stimulus approach argue that Britain and Germany, with their efforts to bring down borrowing, amount to deficit fetishism.

Critics say the States are trying to spend their way out of debt.

At its current levels sterling is encountering technical resistance. Once that is out of the way sterling could have another five cents of obstacle-free progress ahead of it.

For more information and expert guidance on the currency markets, call Moneycorp today on +44 (0)20 7589 3000. Alternatively go to www.moneycorp.com where you can open a free, no obligation Trading Facility.

Deflation remains embedded in the Japanese economy.

Sterling eased lower by one yen, from ¥135.50 to ¥134.50, reversing the previous week’s equally modest appreciation. The three-yen range saw one touch of €136 and two half-hearted looks at ¥133 (see Forex Spread Trading).

The week’s statistics from Japan met with the usual complete lack of interest. None was particularly impressive. Department store, convenience store and supermarket sales were all lower in May than they had been a year ago. Supermarket sales fared worst, falling by -5.3.

The trade surplus halved in May with imports down and imports up. The lack of enthusiasm among shoppers was reflected not just in the sales figures but also in the continuing fall of consumer prices.

Deflation in the year to May was -0.9%, not as bad as the previous month’s -1.1% but still a whole lot too negative for economic comfort.

The yen’s unique selling proposition is the way investors see it as a safe haven for their money. That may sound odd, given that Japan is one of the most indebted countries in the world with national obligations amounting to more than 200% of GDP (the United States and Britain are around 100% and 80% respectively; exact figures do not exist).

There was not a whole lot of panic on the street last week but sufficient nervousness to allow the yen to keep pace with the rebounding pound – just about the only currency that could.

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