Global markets are in the doldrums and with decreased trading volumes and a lack of positive data there has been little to prevent a downward path this week.

The Dow is down 2.23% on the week and just over 6% on the month, slipping below the critical 10,000 level (closing yesterday at 9,985).

S&P and Nasdaq have followed suit heading into the end of the month 6.7% and 6% down on the month.

In the UK CFD market, the FTSE clawed back from the 6 week low of 5070 seen on Wednesday but is still 3.50% down on the month. In Asia, the Nikkei and Hang Seng haven’t bucked the global trend also down 5.5% and 2% on the month.

Yesterday the Labor Department in the States reported a reduction in new U.S claims for unemployment benefits. Initial claims for state unemployment benefits fell 31,000 to a seasonally adjusted 473,000, below market expectations for a drop to 490,000.

However this figure did little to support the dollar as firstly the claimant’s number still remains high and there is still a real concern about the recovery of the States after the horrendous week it has had.

Many economists also look at the four week average price of initial claims which is viewed as a better gauge of employment trends; this figure was up slightly by 3,250 from 486,750.

Despite the onslaught of poor data Germany continues to shine as German consumer morale increased for the third month running, hitting its highest level since last October. German CPI data is also due out this morning and if it follows the positive trend we may seen the reading come out ahead of expectations however seasonal trends suggest August CPI readings are usually low.

Euro Zone money supply growth held steady in July as loans to the private sector steepened. The Conference Board’s leading economic index for the Eurozone (which is used to identify turning points in the business cycle of the Euro Zone) rose by 1% to 112.5 in July.

The European Central bank reported loans to the private sector grew at a annual rate of 0.9% up from 0.5% rise in June.

Today should be an interesting day in the financial spread betting markets with GDP readings from the UK and US coupled with Bernanke speaking this afternoon. UK GDP Q2 2nd release is expected to be unchanged at 1.1% and US GDP Q2 2nd release is expected to be revised down slightly to 1.3%.

This afternoon all eyes will turn to Bernanke who is speaking at a conference at 3pm (GMT) at the Economic Symposium in Jackson Hole, Kansas. It is anticipated that Bernanke will revise down the US 2nd quarter economic growth figure at this annual conference. The recent flow of disappointing data from the States has fuelled fears of a double dip recession. Gold has edged higher this week to current levels of 1236 per ounce (Gold has surged this month as investors seek safe havens and is up 4.80% on the month).

CFDs, margined forex and financial spread trading are leveraged products. They carry a high level of risk to your fund. It is possible to lose more than your initial capital outlay with these products and they may not be suitable for all investors, do ensure that you fully understand the risks involved, seek independent financial advice if necessary.

This content should not be construed in any circumstances as a recommendation or solicitation of any offer to buy or recommendation or offer to sell any security or other financial instrument.

Sterling’s progress was far from directionless last week. It covered its two cent range – or at least most of it – six times. But it did not go anywhere.

In the CFDs market Sterling opened in London yesterday morning within a quarter cent of last Monday’s departure point.

Thursday morning’s positive performance was more clearly founded. Public sector net borrowing in July was £3.2 billion, two billion lower than forecast and less than a quarter of the previous months shortfall. Retail sales rose by 1.1% in the month instead of the 0.4% analysts had predicted. But the euphoria evaporated quickly after The United States delivered another set of duff data. Sterling had to give back in the afternoon what it had won in the morning.

The US data included very little to reassure investors over their recently-reawakened fears of double-dip global recession. A tolerable start on Monday saw the New York Federal Reserve’s manufacturing index improve by one point to 7.1 but it was a lousy finish on Friday when their colleagues in Philadelphia reported a 13-point drop to -7.7, signifying falling activity.

Residential real estate remains a problem area. Housing starts were steady in July but building permits were down again. The National Association of Homebuilders reflected the problem in their housing market index. It went down to a measly 13, the lowest level since March last year despite the NAHB having spent $600k on lobbying in the second quarter of the year.

Perhaps the most disappointing figure was the half million new claims for jobless benefit the week before last. The number was not a lot higher than the previous week’s 488k claims but the big round number was psychologically painful.

The only really dollar-positive factor was the weaker tone of economic statistics from around the world, including the United States. Investors worry that the global recovery might not have the horsepower to pull away from the black hole of recession.

For every good number here they can see a bad one there. In such a mood they are less likely to embrace risk, more likely to seek the security of a safe-haven currency such as the Japanese yen (last week’s best performer) or the US dollar.

In the financial spread betting market a week ago the pound was caught in a two-cent range, hemmed in by technical resistance to the upside and technical support to the south. Nothing has changed.

Although that support has turned out to be more robust than it originally seemed, until sterling either rebounds from or sinks through that level its future direction can be no more than a guess.

CFDs, margined forex and financial spread trading are leveraged products. They carry a high level of risk to your fund. It is possible to lose more than your initial capital outlay with these products and they may not be suitable for all investors, do ensure that you fully understand the risks involved, seek independent financial advice if necessary.

This content should not be construed in any circumstances as a recommendation or solicitation of any offer to buy or recommendation or offer to sell any security or other financial instrument.

Sales of previously owned US homes dropped more than expected in July to their lowest pace in 15 years implying further loss of momentum in the States economic recovery.

The record drop of 27.2% from June equates to an annual rate of 3.83 million units which is the lowest level since May 1995 and June’s sales pace was revised down to a 5.26million-unit pace.

The CFDs markets had been anticipating a tumble of around 12% and so were shocked with the magnitude of this figure.

In the forex spread trading markets, the USD dropped significantly against the JPY following the news to a new 15-year low of around 83.60. This prompted more verbal intervention from Tokyo but made little impact however as investors continue to sell USDJPY and are now focusing on the all time lows of 79.75 from 1995.

Investors ploughed money into government bonds, driving down the implied cost of borrowing to record lows in Britain and Germany. The UK 10 year gilt yield fell to 2.88% which is even lower than that of March 2009 when the BoE announced that it would buy billions of gilts under its quantitative easing scheme. US 10 treasury yields broke below 2.5%. Oil followed suit and fell below $72 a barrel yesterday, down for a fifth day after weak US economic data spread gloom about the ability of the US, oils top consumer, to work through record stocks.

These ripples of doubt ran across the globe and caused equities to close down; Britain’s top share index closed lower with UK banks, miners and energy stocks bearing the brunt of the sell-off. The FTSE ended down 78.89 points (1.5%) at 5,155.95 which is its lowest close since 20th July and unwound the gains of 0.8% which we had seen on Monday.

Chief executive of fund manager Jupiter, Edward Bonham Carter, was trying to make sense of all of this data yesterday and predicted that equities will be range-bound for the next three to five years, but with significant bouts of volatility in between. #

This has sparked chat about a new animal metaphor coming into play…forget your bulls and bears we are now talking about hippos! Apparently the hippo is considered the animal half way point between bull and bear… the animal that lies around in the mud doing little for a lot of the time but whose occasional bouts of activity can surprise people. They are also pretty dangerous when they want to be!

Article written by currenciesdirect.

None of the above information constitutes, nor should be construed as financial advice.

The newest member of the Bank of England’s rate-setting Monetary Policy Committee hit the headlines this morning.

Britain faces “significant” risk of a fresh slump into recession according to Dr Martin Weale, who said it would be “foolish” to rule out the possibility of a double-dip downturn.

He also thought the Banks central outlook on growth could be too optimistic in light of the fiscal cuts currently being implemented. The BoE forecast is for growth of about 2.8% in 2011 and 3.2% in 2012.

Sterling has dropped over a cent against the Dollar following the news and has traded as low as $1.5371.

M&A activity in the US, helped lift sentiment yesterday, unfortunately this did not last for long and both main stock indexes closed marginally down on the day.

There is little economic news again today so focus is likely to remain on the existing home sales in the US which is out this afternoon at 15:00.

Figures are expected to show that sales of existing US homes fell to an annual rate of 4.67 million in July from 5.37 million in June. There is also housing data due out tomorrow which is due to show that sales of new homes rose to 340,000 from 330,000 in June.

In Europe we have seen data from the Federal Statistics Office this morning confirm that German GDP grew 2.2% in the second quarter compared with the previous three months, which is actually up 4.1% on the year.

The news provides yet further evidence of the strength of the recovery in Germany whilst other countries in the Eurozone still falter.

Yesterday consumer confidence in the Eurozone and the European Union improved slightly in August according to figures from the European Commission.

The figures rose to -11.4 from -13.8 for the 16-country currency area and beat expectations of -12.8 although this data release went relatively unnoticed in the markets and did not impact on the Euro.

Article written by currenciesdirect.

None of the above information constitutes, nor should be construed as financial advice.

Reports today suggest FX analysts are the most pessimistic on the Pound since May 2009, predicting the Chancellor’s cuts will eat into economic growth.

The already soft economic recovery is forecast to slow causing Sterling to fall back against both the Dollar and Euro.

Median estimates suggest the Pound will drop 8 per cent against the Euro by year end as the recent bullish UK data starts to deteriorate.

The US Dollar rose sharply on Friday against the Euro, Sterling and the Australian and Canadian Dollars on the back of risk aversion, while safe haven currencies such as the Swiss Franc and Yen strengthened against the Dollar.

The Fed is perceived by the markets to be in a holding pattern until further directional economic data is released.

Weakness in global equities carried through to European markets sending major indices lower while US stocks are lower as the sell off continued. The current lack of Tier 1 economic data out of the US is putting the focus on the equity markets.

The Euro fell against a basket of currencies on Friday and remains on the defensive this morning as comments by a senior ECB official fuelled expectations for liquidity to remain a concern for the single currency.

ECB Governing Council member Axel Weber told Bloomberg in an interview published on Friday it would be “wise” to extend unlimited liquidity to banks past the end of 2010. The Euro was further hit after the US Federal Reserve said the US and global economic recovery was losing steam, striking a nerve with investors.

The Eurozone is seeing an increasing split not only in banking but in the economy in general. While the Eurozone economy improved in the second quarter with Germany setting the tone, southern Europe recorded much more muted growth.

Market analysts believe the ECB may have little option but to keep flooding the money market with cash to help banks and governments in the EU.

The Eurozone economy will remain under the spotlight today with the release of the flash August Eurozone PMI’s which are expected to fall back from 56.7 in July to 55.5.

In the US the focus will be on the release of housing and labour market figures. On Friday of this week the focus will be on the UK with the release of Q2 GDP growth figures.

Article written by currenciesdirect.

None of the above information constitutes, nor should be construed as financial advice.

Gilts opened lower and Sterling remained on the back foot on Thursday morning ahead of UK Public finances and UK retail sales.

The market continues to be concerned about public sector debt so any poor data was expected to see the market react abruptly as investor’s fear the UK government will struggle to meet its target for narrowing the deficit this year.

However, unexpectedly, retail sales actually rose three times faster then had been predicted in July. The Office for National Statistics said retail sales rose 1.1% on the month, the strongest growth since February 2010 and well above analyst forecasts for a 0.4 % rise. On the year, retail sales rose 1.3 %, again above forecasts of 0.6 %.

There was also a sharp improvement in Public Finances mainly driven by strong growth in tax receipts. The Treasury were quick to react after seeming concerned that this figure would be interpreted as more positive for future budget forecasts and they announced that their figures were still in line with the Office for Budget Responsibility full forecast. Sterling strengthened off the back of these figures and moved 1% higher against the Dollar and 0.5% against the Euro.

The UK managed to start the day off on a positive note but unfortunately the States were unable to continue this trend. U.S unemployment claims spiked to a nine month high. The Labour Department reported initial claims for state unemployment benefits increased 12,000 to a seasonally adjusted 500,000, the highest since mid-November.

The Dollar came under further pressure after factory activity in the US Mid-Atlantic region fell in August to -7.7 from 5.1 in July reported by the Federal Bank of Philadelphia on Thursday. This reading was the lowest reading since 2009.

The Dollar fell further against the Yen and nearly touched the 15 year low we saw earlier on this week as investors continue to remain apprehensive about the pace of the US economic recovery. Obama spoke out yesterday urging the Congress to push legislation to force tax cuts and ease credit for smaller businesses.

Gold benefited yesterday as investors flocked to safety. Gold looks set to climb higher and closed yesterday up at $1235.40. Conversely, Brent Crude Oil slumped by 1% to close at $74.40 as uncertainty in the US may signal lower demand.

Other news in the headlines includes a slew of takeover activity as companies eye up targets. There will be ongoing coverage of BHP’s now hostile takeover bid for Potash. BHP will begin the hard sell of the $40bn hostile bid to their own shareholders next week at road shows across the globe.

It wouldn’t come as a surprise if BHP increase their bid after Potash rejected it and due to the likely scenario of a rival bidder entering the market. BHP could probably hike their offer to as much as $165/$170. Analysts have tipped Brazil’s Vale and rival Chinese and Russian firms to be on the sidelines.

Other M&A activity includes Intel’s announcement that it will buy McAfee for $8bn and the $2.9bn hostile bid launched by Korea National Oil Corp for UK explorer Dana Petroleum after it’s takeover offer was rejected. No doubt we will get more stories about this flurry of hostile M&A activity over the weekend.

Today is a quiet day with only Canada’s CPI date for July out at 12.00.

Article written by currenciesdirect.

None of the above information constitutes, nor should be construed as financial advice.

Such is the way in FX markets at the moment, no sooner had Sterling been given a boost, rising almost 1 cent against the Dollar yesterday on the back of the Bank of England minutes, than it gave up almost all the gains overnight in the Asian session.

Déjà vu on Thursday, the Pound is again up almost one cent after very strong retail sales and public sector net borrowing figures. Retail sales including auto fuel rose 1.1% month-on-month against a forecast of 0.3%, with the year–on-year number is now 1.3% against an estimate of 0.6%.

The strong numbers were driven in particular by non store and other store retailing, producing year on year increases of 6.1% and 16.4% respectively. Public net sector borrowing data is also fuelling Sterling’s rise as figures released at the same time at retail sales show the Governments net borrow was lower than forecast, £3.17bn versus a forecast of £4.8bn.

The tightest fiscal squeeze since World War Two looks to be taking hold, and the markets like what they see thus far.

German Producer Prices posted another increase this month, showing gains 0.4% higher than forecast at 3.5% yoy. The PPI data affirming the strong GDP growth figures released last week and helping to shrug off the disappointing ZEW economic sentiment figures earlier in the week.

A lack of data from the Eurozone this week means the Euro is being driven by news flow from the other half of the pairs, but with the bond auctions on Tuesday passing without incident we can expect an unnatural degree of calm, in comparison to recent months, going into the weekend.

This afternoon sees the release of the Philadelphia Fed survey covering business conditions and production which is closely watched in the currency markets.

Given the recent glut of disappointing data release we expect the survey to confirm the general slowdown in economic recovery. Also released are initial jobless claims and continuing claims.

Article written by currenciesdirect.

None of the above information constitutes, nor should be construed as financial advice.

The Euro regained ground against the USD and Sterling yesterday as Ireland’s 2014 and 2020 bond auctions largely passed without incident.

Spreads were already tightening ahead of the auction, and final bid-to-cover ratios of 5.4 and 2.4 respectively showed that demand remains firm.

Spain also sold €5.5 billion of 12 and 18-month bills at lower yields than in previous auctions in July. We wait to see if ECB intervention was the main reason for the strong demand.

The European data picture was less rosy, however, as the ZEW Economic Sentiment survey was much lower than expected at 14.0 (consensus. 20.0), though the current situation index was firm at 44.3 (cons. 24.0).

Sterling is trading up 50 pips after the release of the Bank of England minutes showed one member, Andrew Sentance, voted to start the withdrawal of the exceptional monetary stimulus.

This is the third straight meeting that Sentance has been the lone dissenting voice calling for a 25 basis point increase in the banks base rate. He argued that the economic recovery is gaining momentum and the Bank needed to act to make sure inflation expectations are not allowed to deviate from current levels due to the current inflation rate stuck stubbornly above target.

Traders have taken this as a positive sign for the UK economy and the Pound now has just broken through $1.56 against the Dollar and €1.21 against the Euro.

Overnight, currency markets exhibited all the symptoms of risk aversion in overnight trade, with the US Dollar and the Japanese Yen tracking higher against all of their major counterparts.

The Dollar was also supported by data released yesterday which showed that producer prices for finished goods rose slightly in July, the first such increase in three months.

The price rise of the core index was the largest gain since January and, taken with the Consumer Price Index last Friday which also showed an increase for July. The report should help ease concerns among some Fed officials about the possibility of a drop in prices and salary, or deflation.

Apart from the Bank of England minutes, today is very light on the data front with Eurozone construction and US crude oil figures the only highlights.

Article written by currenciesdirect.

None of the above information constitutes, nor should be construed as financial advice.

Inflation figures just released shows CPI exactly as forecast, 3.1% year-on year and 0.2% month on month.

Although the figure is slightly down from last month, the yearly rate still exceeds the Bank of England’s target of 2% plus or minus 1%. This has triggered another round of pencil sharpening and a letter from the Governor Mervyn King to the Chancellor explaining why inflation remains stubbornly above target.

Sterling briefly traded down immediately after the announcement but has retraced its steps and is now higher in the majors. Tomorrow sees the publication of the minutes from Augusts MPC meeting which, as usual, will be dissected with the hope of shedding light on future members voting preferences.

Of particular interest this month is discovering if any MPC members voted for an increase in the asset purchase scheme in light of the Feds decision last week and judge the extent that any extension in QE was discussed at the meeting.

Any discussion of British QE will have a negative impact on Sterling, which judging by Mr Kings comments last week, is still something that the bank is actively pursuing to aide the economic recovery.

Today marks an important Irish bond auction, the National Treasury Management Agency will sell as much as €1.5 billion ($1.9 billion) of four and 10-year bonds. The increasing costs lenders charge the Irish government is being closely monitored since their budget deficit is the highest in Europe, and today is seen as a litmus test for demand for EU government debt.

With US treasuries now yielding so little, one may expect yield hungry investors to snap up the Irish bonds, but we wait for the bid to cover ratio to assess how keen investors really are given the perceived riskyness of investment into PIIGS government debt.

German ZEW data is expect to stabilise after falling in previous months and this will likely help the Euro to strengthen across the board.

The US Dollar was again under pressure as another batch of disappointing data was released. Empire manufacturing figures and the NAHB housing market index both suffered surprise declines yesterday and the theme is still consistent with the economic recovery faltering in the US. This afternoon we see US PPI along with housing starts and industrial production.

Article written by currenciesdirect.

None of the above information constitutes, nor should be construed as financial advice.

Friday was a busy day on the economic data front. First up, we saw figures released showing that the Eurozone economy expanded in the second quarter at the fastest pace in nearly four-years.

The Euro-Zone’s seasonally adjusted preliminary second quarter GDP showed an expansion of 1.0%, compared with the previous 0.2% and the expected 0.7%. The biggest jump in the figures came from Germany’s GDP, with a preliminary reading of Q2 GDP showing extremely robust 2.2% q/q growth, well above expectations of 1.3%. This was the fastest pace of growth in nearly 20 years since German reunification. Global demand and a weaker Euro helped boost exports during the period, sustaining growth in the area.

Whilst the UK can take comfort from the fact that they can control their own currency, there are still issues.

House prices in the UK have taken a bit of a knock for the month of July according to figures posted by Rightmove, the property website. The figures reflect that people wanting to sell their homes are having to cut prices faster than at any time this year following a flood of properties hitting the market. On a national basis house prices have come in by 1.7% from July to August. Following the Bank of England cutting its growth forecast on Wednesday and raising its estimate of inflation this housing data has not helped the continued fear around the risk of a double dip recession.

Friday’s US data was broadly in line with expectations. July retail sales rose by 0.4% (versus market consensus +0.5%) and the June reading was revised up to -0.3% from -0.5%. Crucially, core CPI inflation for July was steady at +0.9% as expected, suggesting there has been no increase in deflationary pressures in the past month. This may help calm fears that the Fed will be forced to launch another round of QE later this year.

The University of Michigan consumer sentiment index rose to 69.6, fractionally ahead of consensus of 69.0. The weakening risk environment allowed the US Dollar to hold onto much of last week’s gains. On the week, the euro shed 4.13% against the dollar with sterling only loosing 1.9%.

In other news, China is officially the second largest economy in the world, after the US. The Japanese GDP data out overnight reflected that China has moved into the lead and a number of economists are forecasting that China will take over as Number One by 2027.

This week’s economic calendar starts with today’s Eurozone’s CPI inflation data for July with a market expectation for 1.7% year on year.

This is a heavy week for UK data starting with July’s CPI, due on Tuesday, expected to moderate again to +3.1% year on year versus previous month’s +3.2%. On Wednesday, the minutes from the August 5th MPC meeting are due, with weekend press speculation suggesting the possibility of a three-way-split in how the votes were cast.

We expect MPC Member Sentance to remain a lone voice in calling for a rate hike. After the recent weakness in house price and consumer confidence, retail sales due on Thursday will be a useful barometer of whether consumer spending has been affected by headlines warning of imminent and severe fiscal consolidation.

Out from the US this week, starts with tomorrow’s July’s housing starts and industrial production. This is then followed on Thursday by weekly initial jobless claims and two indices of manufacturing activity.

Article written by currenciesdirect.

None of the above information constitutes, nor should be construed as financial advice.