The Eurozone Sentix investor index strengthened to 2.5 for April from
-7.5 previously. This was the first positive reading since the second
quarter of 2008 and should provide some degree of relief over
near-term economic prospects. The Euro was still unable to gain any
significant support as underlying debt fears remained an important
negative factor. There were press reports that Greece was
uncomfortable with the prospect of IMF support and would look to
re-negotiate the recent support package. These reports were denied,
but spreads on Greek bonds over German bunds widened to over 400 basis
points which undermined the Euro and it dipped to 7-week lows.
USD
There were no further US economic data releases during Tuesday and
there are only limited releases due over the remainder of this week.
There is still likely to be a mood of cautious optimism surrounding
the economy and the dollar should be in a position to gain support on
yield grounds. Within the FOMC minutes released on Tuesday, there were
comments indicating that there was no fixed time for the extended
period language and the members were broadly confident that the Fed
could react and tighten policy quickly if required. The timescale for
any hikes though are still looking more towards the long term. There
were also some concerns over the contraction seen in bank lending seen
during the first two months of the year. Overall, the minutes cast
doubt on rate increases this year and did not provide additional
dollar support with the Euro recovering back to the 1.34 area.
GBP
Opinion polls will remain under close scrutiny ahead of the May 6th
general election and Sterling will tend to gain some support if they
suggest a clear outcome while speculation over an indecisive outcome
would tend to be a negative factor. There will still be underlying
unease over the budget situation and wider European sovereign debt
fears would also tend to undermine Sterling confidence on fears over a
credit-rating downgrade. The construction PMI index rose to 53.1 for
March from 48.5 the previous month and this was the first figure above
the 50.0 benchmark for over two years. The data should maintain some
degree of optimism towards near-term economic trends and the PMI
services-sector index will be watched closely on Wednesday. Sterling
found support around the 1.5150 area against the dollar and pushed
higher back to the 1.5280 region later in US trading with the currency
gaining support from solid risk appetite. There was further tough
resistance above this area.
Morning Market Rates: (Please note: These are indication prices only,
they are not offer rates)
GBP/USD: 1.5208
GBP/EUR: 1.1355
GBP/AUD: 1.6415
GBP/CHF: 1.6287
GBP/ZAR: 10.9851
GBP/JPY: 142.57
USD/JPY: 93.62
USD/ZAR: 7.1981
EUR/USD: 1.3353
EUR/ZAR: 9.6120
GBP/NZD: 2.1564
GBP/CAD: 1.5204
EUR/CHF: 1.4280
GBP/AED: 5.5649
