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 The GBP thread

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Sauros

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PostSubject: The GBP thread   Fri Oct 23, 2009 9:41 am

A bit of action on the GBP lately! I open here the GBP thread the day the UK surprisingly stays in Recession and to follow up the discussions we had in 2 other threads :
http://forum.thelordoftrading.com/economic-news-market-comments-opinions-f5/pound-advances-to-one-month-high-as-king-sees-rate-increases-t208.htm

http://forum.thelordoftrading.com/economic-news-market-comments-opinions-f5/uk-economy-unexpectedly-shrinks-in-longest-slump-on-record-t222.htm
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PostSubject: Re: The GBP thread   Fri Oct 23, 2009 1:08 pm

I would short the spot in the short term maybe 2-3 weeks out. anyone else? This sentiment maybe all priced in at this point...
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PostSubject: Re: The GBP thread   Fri Oct 23, 2009 1:21 pm

Theres a nice calyon report on currencies in the research crypt for you members, I suggest reading it if you not sure the background to this discussion
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PostSubject: Pound Is Poised for Goldman Rally Not Helping Brown (Update1)   Mon Oct 26, 2009 9:21 am

Pound Is Poised for Goldman Rally Not Helping Brown (Update1)
2009-10-26 05:06:27.374 GMT

(Updates prices in sixth and eighth paragraphs.)
By Ye Xie and Anchalee Worrachate
Oct. 26 (Bloomberg) -- The U.K. pound, trading at the cheapest level against the euro in a decade, is making everything from Ipods to Toyotas less expensive for foreigners and turning Goldman Sachs Group Inc. into a sterling bull.
Purchasing power parity, a measure of the relative cost of goods, shows the currency is 22 percent below where it should be, according to data compiled by Bloomberg. Sterling hasn’t been so inexpensive since 1999 after Bank of England Governor Mervyn King flooded the economy this year with 175 billion pounds ($285
billion) buying government bonds to keep borrowing costs from rising as the economy shrinks.
"The U.K. is cheap, its properties are cheap, its companies are cheap," said Stephen Jen, a money manager at BlueGold Capital Management LLP in London and the former head of foreign exchange at Morgan Stanley. "Friends and family who have visited me always complained about the cost of living in London, but they have since stopped complaining."
U.K. assets from houses to soccer clubs have been discounted as the seizure in credit markets drove the economy into its worst recession since World War II, forcing Prime Minister Gordon Brown’s government to take stakes in two of the nation’s biggest banks. Brown, whose Labour Party trails behind the Conservative opposition by 17 percentage points according to an Ipsos-Mori Ltd. poll last week, must call an election by June.
Gross domestic product unexpectedly shrank 0.4 percent in the third quarter, the Office for National Statistics said on Oct. 23, continuing the longest contraction since records began in 1955.

Mergers, Acquisitions

Sterling declined 0.3 percent against the dollar to $1.6266 today, and fell 0.4 percent versus the euro to 92.38 pence on speculation the faltering economy would prompt the central bank to expand its asset-buying program. The pound had gained 1.2 percent versus the dollar and 0.7 percent compared with the euro in the four days before the GDP report.
The pound’s slide is fueling mergers and acquisitions in the U.K., bringing the first net inflows to the country in three years, Bloomberg data show. The last time that happened, in 2006, the pound jumped 2.1 percent versus the euro and 13 percent against the dollar, the biggest gain in 16 years.
Goldman predicted this month that sterling will appreciate
9 percent versus the euro to 84 pence by year-end, and by 14 percent to $1.85, even as U.K. debt quintuples as a percentage of gross domestic product. Jen sees the currency climbing 7.6 percent to $1.75.

Taylor Rule

Investors underestimate the risk of the Bank of England increasing its key interest rate from the current all-time low of 0.5 percent, according to a study by Frankfurt-based Deutsche Bank AG based on the Taylor Rule, an economics equation for predicting central bank moves based on policy makers’ tolerance for inflation and unemployment.
The Taylor Rule shows the rate should be about 2.75 percentage points higher, Deutsche Bank said in the report.
Futures contracts predict less than a quarter-percentage point increase by April 2010, the biggest disparity among the Group of 10 economies, according to the study.
"The Bank of England is the most out of line among the G- 10 nations in terms of policy," said Henrik Gullberg, a strategist in London at Deutsche Bank, the world’s largest currency trader.

King’s Comment

The rate is likely to rise to 1.25 percent by the end of 2010, with increases starting in the second quarter, according to the median of 10 economists’ estimates compiled by Bloomberg.
The European Central Bank and Federal Reserve probably won’t boost borrowing costs until the third quarter, separate surveys show. Rates will rise "at some point," King wrote in an opinion piece in Scotland’s Herald newspaper on Oct. 21, adding "it would be wise to take this into account."
Consumer prices are poised to rise faster in the U.K. than in any other developed economy. The inflation rate in Britain will be 2.1 percent this year, compared with 0.3 percent in the euro region and a decline of 0.4 percent in the U.S., according median estimates in surveys by Bloomberg News.
The pound fell 4.4 percent against the dollar in August and September, the steepest two-month drop this year, amid speculation King and his Bank of England colleagues favor a weaker currency and expanding the central bank’s asset-purchase program. It lost 6.9 percent versus the euro, prompting Citigroup Inc. and BNP Paribas SA to predict sterling would reach parity with the 16-nation European currency by the first quarter of 2010.

Borrowing Binge

Brown is committing unprecedented amounts of cash to spur growth and rescue banks such as London-based Lloyds Banking Group Plc, the nation’s largest mortgage provider, and Royal Bank of Scotland Group Plc in Edinburgh, the 282-year-old lender that was Europe’s biggest bank by assets.
His Labour Party had the support of 26 percent of voters compared with 43 percent for the Conservatives and 19 percent for the Liberal Democrats, the London-based Ipsos-Mori market research company said on Oct. 20. Mori polled 996 people between Oct. 16 and Oct. 18.
The government’s budget deficit will climb to 175 billion pounds in the year ending March 2010, or 12.4 percent of gross domestic product, the most in the Group of 20, according to an April forecast from the U.K. Treasury. The deficit was 77.3 billion pounds in the first six months of this year, the largest for any half-year period since records began in 1946.

‘Ridiculously Cheap’

"The story in the U.K. is not great," said Peter Lucas, an investment strategist in Jersey, Channel Islands, at RBC Wealth Management, which has $430 billion in assets. "There might be scope for the pound to rise in the near term, but these underlying issues do require the pound to be an undervalued currency for some time."
Hedge funds and other large speculators held record wagers this month that the pound will decline against the dollar, with so-called net shorts increasing eight-fold from the end of August to 65,346 on Oct. 13, before declining to 43,318 last week, data from the Washington-based Commodity Futures Trading Commission show. The figures reflect holdings in currency- futures contracts at the Chicago Mercantile Exchange.
"Sentiment for sterling is extremely negative," said Nigel James Rayment, a money manager in London at JPMorgan Asset Management, which oversees $1.3 trillion, including $60 billion in foreign-exchange assets. "Against the euro, it looks ridiculously cheap," with fair value at about 80 pence, he said.
The pound may rally to $1.80 by year-end, according to Rayment, who co-manages the JPMorgan Sterling Managed Currency Plus Fund, which beat 89 percent of its peers this year with returns of 13 percent, according to Bloomberg data.

Foreign Buyers

Kraft Foods Inc., the Northfield, Illinois-based maker of Oreo cookies, bid 10.2 billion pounds for Cadbury Plc on Sept. 7.
A Saudi Arabian investment firm backed by Prince Faisal bin Fahad bin Abdullah al-Saud, the chairman of sports investor F6, is considering buying a stake in Liverpool, the English Premier League soccer team, F6 director Barry Didato said Sept. 29.
Overseas companies announced or completed $34.7 billion of U.K. company takeovers this year, bringing a net $4.1 billion into the country, according to Bloomberg data. That compares with outflows of $2.3 billion in 2008 and $152 billion in 2007.
"Fresh money is coming into the U.K.," said Thanos Papasavvas, who helps oversee $4 billion as head of currency management at Investec Asset Management Ltd. in London and increased bets this month that the pound will appreciate.
"There’s enough doom and gloom on the pound, but investors are wrong-footed."
Overseas investors bought 4.27 billion pounds more U.K.
gilts than they sold in August, the most since February, Bank of England data show.

Stock Bargains

For Europe-based money managers, the average cost of buying U.K. stocks dropped 13 percent from a year earlier as the pound depreciated, according to Bloomberg data.
U.K. stocks outperformed their peers in Europe and the U.S.
in the third quarter. The FTSE 100 Index rose 21 percent, its best performance since at least 1984, compared with a 17.8 percent gain in Europe’s Dow Jones Stoxx 600 Index and a 15 percent advance in the Dow Jones Industrial Average.
Consumers can snap up bargains too. A Toyota Motor Corp.
three-door Yaris hatchback costs 9,905 pounds in the U.K., compared with 12,090 euros, which is the equivalent of 10,909 pounds, in France, according to the Web site of the Toyota City, Japan-based carmaker. A 160-gigabyte Apple Inc. Ipod Classic is priced at 183.90 pounds at Amazon.com in the U.K., versus 214.95 euros, or 193.97 pounds, in Germany.

‘Too Bearish’

Goldman Sachs advised clients to buy the pound in March, and dropped the recommendation when the currency climbed to
$1.65 in June, a bet that returned 12 percent when accounting for changes in interest rates. It began backing the pound again on Oct. 15.
"The market is way too bearish on the U.K. economy and way too short sterling," said Thomas Stolper, an economist at Goldman in London. "The Bank of England has a history of surprising the market." King may boost rates as soon as April, said Stolper.
Barclays predicts the pound will rise about 8 percent to
$1.76 in March, and gain 7.6 percent to 85 pence per euro.
"There’s more inflation pressure in the economy than people realize," Paul Robinson, a currency strategist at Barclays Capital in London who worked as an economist at the Bank of England for 11 years until 2006. "The BOE is likely to tighten policy a bit earlier than the market thinks. Sterling has to appreciate as the clouds clear."
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PostSubject: Re: The GBP thread   Tue Nov 17, 2009 2:32 pm

I'm quite proud of my latest post on the blog, EURGBP : swinging in the rain where I detail my EURGBP trades of the last couple of months
As I write the EURGBP is testing its 200-SMA.
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PostSubject: Re: The GBP thread   Wed Dec 30, 2009 10:57 pm

Today, the last full trading day of 2009 which was i'm pretty sure a sleepy day in all the trading rooms in the world , we've seen a strong surprise rally of the GBP and the GBPUSD jumped from 1.585 to close to 1.61 in a couple of hours with no specific event (that I know, I'm screen off actually). I guess we've seen this strong move only as we're during the end of year holiday for most of the players and a period of very light volume. So the move is for me merely noise and I initiated a short GBPUSD (Cable) position (I know I know I'm supposed to be on holidays) but I meant shorting the cable soon and I've seen the move today as an opportunity.

- I believe the USD rally at the end of the year was technically strong enough to still have some steam and continue. It suggested that the "USD risk aversion play" may have ended and that we're back to the period when trading a pair meant playing the relative value between two countries. Namely a short GBPUSD position was shorting the UK and being long the US and it looks like it the case now. The USD rally was motivated as well by positive US economic data that fed speculations that the FED could tighten its monetary policy earlier than initially expected. It seems the Forex that used to be driven by interest rate differential is now driven by the timing the Central banks will withdraw their stimulus and increase again the rates and once again the FED vs BoE play can make sense.
- I think that the 200-SMA that kind-of stopped the crazy rally could act as a strong resistance. Should it break I would give a second thought to my position
- I can see on the upside a few obstacles that can offer a good resistance: 20 and 50-SMA and we're currently on a Fibonacci retracement but to be very honest, I can't manage to see when I traced the retracement and i'm absolutely not able to tell you what retracement it is (it's on my chart, that's it)
- The technical and chart landscape seems to me still pretty bearish

This said, as you may know, I'm never comfortable fading a strong move and trying to pick the reversal. We'll see...


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PostSubject: Pound to Drop on ‘Dead Cross’ Versus Dollar: Technical Analysis   Tue Jan 05, 2010 12:14 pm

Pound to Drop on ‘Dead Cross’ Versus Dollar: Technical Analysis
2010-01-05 01:47:37.190 GMT

By Yasuhiko Seki
Jan. 5 (Bloomberg) -- The British pound may fall toward a three-month low against the greenback as it is close to forming a so-called "dead cross" trading pattern, according to Gaitame.com Research Institute Ltd.
Sterling is nearing a dead cross as the currency’s recent declines push it closer to its longer-term moving average, which normally signals an extended drop, said Kumiko Gervaise, a Tokyo-based currency analyst at the research unit of Gaitame, Japan’s biggest currency margin trader.
"It now looks to be only a matter of time before the 20- day moving average falls below the 200-day moving average," she said. "Should this happen, the pound may stretch its decline toward $1.57."
The pound was at $1.6081 as of 10:21 a.m. in Tokyo, bringing its 20-day moving average to $1.6121 and the 200-day moving average stood at $1.6093, according to data compiled by Bloomberg. The pound fell to as low as $1.5708 on Oct. 13.
The U.K. currency climbed as much as 7.1 percent in the weeks after forming a "golden cross" on May 29 when the 20-day average moved above the 200-day mark, reaching a nine-month high of $1.7043 on Aug. 5.
"If the pound’s 20-day moving average manages to stay above the 200-day mean, the currency may be able to rebound toward the 60-day moving average level, which is a very strong resistance line," Gervaise said. A resistance line is where sell orders may be clustered.
The British currency’s 60-day moving average was at $1.6387.
In technical analysis, investors and analysts study chart of trading patterns and prices to forecast price changes in a security, commodity, currency or index.
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PostSubject: Re: The GBP thread   Thu Jan 07, 2010 9:23 pm

Sauros wrote:
Today, the last full trading day of 2009 which was i'm pretty sure a sleepy day in all the trading rooms in the world , we've seen a strong surprise rally of the GBP and the GBPUSD jumped from 1.585 to close to 1.61 in a couple of hours with no specific event (that I know, I'm screen off actually). I guess we've seen this strong move only as we're during the end of year holiday for most of the players and a period of very light volume. So the move is for me merely noise and I initiated a short GBPUSD (Cable) position (I know I know I'm supposed to be on holidays) but I meant shorting the cable soon and I've seen the move today as an opportunity.

- I believe the USD rally at the end of the year was technically strong enough to still have some steam and continue. It suggested that the "USD risk aversion play" may have ended and that we're back to the period when trading a pair meant playing the relative value between two countries. Namely a short GBPUSD position was shorting the UK and being long the US and it looks like it the case now. The USD rally was motivated as well by positive US economic data that fed speculations that the FED could tighten its monetary policy earlier than initially expected. It seems the Forex that used to be driven by interest rate differential is now driven by the timing the Central banks will withdraw their stimulus and increase again the rates and once again the FED vs BoE play can make sense.
- I think that the 200-SMA that kind-of stopped the crazy rally could act as a strong resistance. Should it break I would give a second thought to my position
- I can see on the upside a few obstacles that can offer a good resistance: 20 and 50-SMA and we're currently on a Fibonacci retracement but to be very honest, I can't manage to see when I traced the retracement and i'm absolutely not able to tell you what retracement it is (it's on my chart, that's it)
- The technical and chart landscape seems to me still pretty bearish

This said, as you may know, I'm never comfortable fading a strong move and trying to pick the reversal. We'll see...

I'm in the money for now with this short GBPUSD (150-200 pips) and it looks like since the beginning of the year, the USD weakened against all the currencies but the GBP which confirms to some extent my fundamental rationale to enter the short...
Not a too bad entry while a bit scary at the beginning: both the 20 and the 200 SMA were deeply penetrated against my position. They ultimately offered a resistance, the 20-SMA first on the last day of 2009 and then the 200-SMA at the beginning of 2010. As seen on the article above, the 20-SMA crossed the 200-SMA which is bearish (a dead cross according to the article, i didn't now the name ).
I'm more comfortable now then when I was standing against the market
Let's wait and see how this will unfold now... Tomorrow there are the NFP, that can have an impact on the USD
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PostSubject: Re: The GBP thread   Sat Jan 16, 2010 8:36 pm

Sauros wrote:

I'm in the money for now with this short GBPUSD (150-200 pips) and it looks like since the beginning of the year, the USD weakened against all the currencies but the GBP which confirms to some extent my fundamental rationale to enter the short...
Not a too bad entry while a bit scary at the beginning: both the 20 and the 200 SMA were deeply penetrated against my position. They ultimately offered a resistance, the 20-SMA first on the last day of 2009 and then the 200-SMA at the beginning of 2010. As seen on the article above, the 20-SMA crossed the 200-SMA which is bearish (a dead cross according to the article, i didn't now the name ).
I'm more comfortable now then when I was standing against the market
Let's wait and see how this will unfold now... Tomorrow there are the NFP, that can have an impact on the USD
I cut my short cable at around 1.625 with a loss of one third of the risked amount (where was my stop).
Since the NFP that showed surprisingly negative, the pair jumped as the dollar weakened and the sterling strengthen. There was fights around the 200-sma but for now it looks like it broke.
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PostSubject: Re: The GBP thread   Tue Feb 02, 2010 9:56 pm

Sauros wrote:
Sauros wrote:

I'm in the money for now with this short GBPUSD (150-200 pips) and it looks like since the beginning of the year, the USD weakened against all the currencies but the GBP which confirms to some extent my fundamental rationale to enter the short...
Not a too bad entry while a bit scary at the beginning: both the 20 and the 200 SMA were deeply penetrated against my position. They ultimately offered a resistance, the 20-SMA first on the last day of 2009 and then the 200-SMA at the beginning of 2010. As seen on the article above, the 20-SMA crossed the 200-SMA which is bearish (a dead cross according to the article, i didn't now the name ).
I'm more comfortable now then when I was standing against the market
Let's wait and see how this will unfold now... Tomorrow there are the NFP, that can have an impact on the USD
I cut my short cable at around 1.625 with a loss of one third of the risked amount (where was my stop).
Since the NFP that showed surprisingly negative, the pair jumped as the dollar weakened and the sterling strengthen. There was fights around the 200-sma but for now it looks like it broke.

I have been following loosely beteween the EUR and the GBP and it seems to me that the EUR is leading the game in terms of USD. Still can't get a clear fundamental picture in mind. Though I will start looking more closely at the GBP again.

Been burned on the EUR for too long now. But i think i can catch the next entry on the right trend side this time around. Ima try to see if I can replicate for the GBP depending on correlations
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PostSubject: Re: The GBP thread   Wed Feb 10, 2010 8:01 pm

The GBP/USD reversed at the confluence of the 38.2% retracement /
Elliott channel resistance, which leaves the pair vulnerable to new
lows.



The GBP/USD broke its diamond top last week and the trend is down
against 16076. The rarity and reliability of the diamond pattern makes
the break especially bearish. Given the 3rd of a 3rd count from 16464,
the first Fibonacci confluence is not until 14714/62. The rally from
15533 may be a 4th wave advance. The rally reversed at Elliott channel
resistance / 38.2% retracement. Favor the downside.
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PostSubject: Re: The GBP thread   Fri Feb 12, 2010 12:54 pm

Looks like I jumped the gun once again, not in taking my position but in cutting my losses on my short Cable too early Sad
It would have been $$$$$$$$$$$$ now
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PostSubject: Re: The GBP thread   Fri Feb 12, 2010 8:48 pm

Sauros wrote:
Looks like I jumped the gun once again, not in taking my position but in cutting my losses on my short Cable too early Sad
It would have been $$$$$$$$$$$$ now

Sometimes the best trade is not always the easiest to make. Snapman had some recent success scalping the pair I recall.
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PostSubject: Re: The GBP thread   Sun Feb 14, 2010 11:48 pm

Batman wrote:
The GBP/USD reversed at the confluence of the 38.2% retracement /
Elliott channel resistance, which leaves the pair vulnerable to new
lows.



The GBP/USD broke its diamond top last week and the trend is down
against 16076. The rarity and reliability of the diamond pattern makes
the break especially bearish. Given the 3rd of a 3rd count from 16464,
the first Fibonacci confluence is not until 14714/62. The rally from
15533 may be a 4th wave advance. The rally reversed at Elliott channel
resistance / 38.2% retracement. Favor the downside.

You into EWT now? Wink
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PostSubject: Re: The GBP thread   Mon Mar 01, 2010 2:08 pm

Sauros wrote:
Looks like I jumped the gun once again, not in taking my position but in cutting my losses on my short Cable too early
It would have been $$$$$$$$$$$$ now

The Cable seen at below 1.48 today, I just missed a 1300+ pips run just because I cut my loss too short. To be frank, the short position was a bit consequent and I was a bit scared. Stopped by the noise...
This said, I could have put it back on the way down, but firstly I'm generally a bit reluctant to put back on a position on the same market once I took a loss before a while. Secondly, in the meanwhile I made a good profit on a short european stock indice position and to some extent it's a bit the same play as the short Cable one.
Finally I'm not sure I would have the courage to hold and let the profits run on all the way down, that's the most difficult part of the game
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PostSubject: Re: The GBP thread   Wed Mar 03, 2010 11:00 pm

SO EUR is strengthening and the GBP is tanking short term this week. is becasue the fundamental weakness in the GBP is much newer than the EUR's? any thoughts of this divergence?
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PostSubject: Re: The GBP thread   Tue Apr 13, 2010 8:42 pm

Just curious, any forecast on the elections and implications for the current fiscal mess the UK is in? Any tories in the house? any labour heads?
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PostSubject: British Pound Threatened with Soft Jobs Report Ahead of Austerity Budget   Wed Jun 16, 2010 5:05 am

DailyFX.com

The British Pound may decline as May’s jobs report shows improvement in the labor market is be losing steam, threatening economic growth prospects as the government prepares an austerity-focused emergency budget.

Key Overnight Developments

• New Zealand Consumer Confidence Soars in Q2 on Unemployment Drop
• UK Consumer Confidence Falls to 11-Month Low Ahead of Austerity Budget
• Japan’s Service Demand Rises for First in Three Months, Outlook Clouded

Critical Levels


The Euro tracked slightly lower against the US Dollar in Asian hours, down as 0.1 percent as markets retraced New York session gains. The British Pound was little changed ahead of the opening bell in London, with prices oscillating in a narrow range around the 1.48 figure.

Asia Session Highlights

New Zealand Consumer Confidence rose to the highest level since the three months ending September 2009 in the second quarter according to a report from the Westpac Banking Corp, which it attributed the increase to the sharp drop in unemployment at the beginning of the year.

Meanwhile, a gauge of UK Consumer Confidence from the Nationwide Building Society unexpectedly dipped to the lowest level in 11 months. Details of the report revealed that the outlook on economic growth over the next 6 months among polled respondents dipped to the lowest level since August 2009, likely reflecting expectations of the fallout from the government’s austerity measures to be announced as part of an Emergency Budget next week (see more below).

Japan’s Tertiary Index of service demand rose for the first time in three months, adding 2.1 percent in April. Retail and wholesale activity as well as information and communication services led the metric higher. The outlook going forward seems uncertain however with some of the government’s stimulus programs expire this year while a new program offering each family a monthly allowance of 13,000 yen is phased in. On balance, April’s labor market figures hinted firms are becoming reluctant about future demand amid fears of a slowdown in China – the core engine of demand driving Japan’s export-led recovery – hinting that lackluster hiring will weigh on consumer spending (including that on services) in the months ahead.

Euro Session: What to Expect

euroopen061620103

UK Jobless Claims are expected to see the smallest drawdown in four months, down 20,000 in May. The Claimant Count (a measure of the unemployment rate) is set to hold unchanged at 4.7 percent, marking the first in four months that the metric fails to show improvement. The outcome has significant market-moving potential: labor market conditions have cautiously but steadily improved since the beginning of the year but any signs that this trend is losing steam may weigh heavily on the British Pound as traders size up the economy’s prospects ahead of an austerity-focused Emergency Budget to be unveiled on June 22. Indeed, as we noted in our weekly British Pound forecast, the growth rate of government spending has regularly outpaced that of private consumption since the first quarter of 2008, so any retrenchment on the fiscal side is likely to bring a slowdown in economic activity. This in turn is set to keep the Bank of England (as best) committed to the current, loose monetary policy setting, an outcome that bodes ill for the UK currency.

Elsewhere on the calendar, final Euro Zone Consumer Price Index figures are set to confirm preliminary estimates to show that the annual inflation rate rose to a 17-month high at 1.6 percent in May. The outcome is unlikely to stir much of a reaction however with price growth still below the European Central Bank’s 2 percent target level and policymakers surely in no position to raise rates amid the debt crisis gripping the region. In fact, the central bank unveiled its own version of quantitative easing in May.
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