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Forex World Cup Report

Posted on June 20, 2010 by larry | No Comments

As if to prove they are kings like their currency the Swiss beat Spain in the Football World Cup (That’s soccer for our American friends). France capitulate, Germany trip up badly, Italy very very poor and England well, the usual mess and progress goes down to the wire.
This could almost be the currency report this year……….

In the forex world things were much the same. The Swiss franc certainly shone the most, the Swiss National Bank signaling a break in intervention. Elsewhere it was echoes of the previous week. Equity markets held up well and so too the Euro. Commodity currencies ( Ausie and Canadian) better, all at the expense of the Yen and dollar. That said the Euro/USD is close to reasonable resistance under 1.24. It would need continued confidence in the equity markets next week and risk generally to continue any progress.
It could prove to be an interesting week for the British Pound. The long awaited emergency budget will be introduced.The usual drip feed leaks of what is to be expected seems to point to the Chancellor Osborne trying to get all the bad news in terms of cuts in spending and taxes out all together. They may be fazed in but should get a good response from the market, all be the flip side on growth will be a negative.
On balance I feel the risk reward right now could be for a good move up in GBP/USD ( CABLE). Maybe owning some short term GBP Call Options could be a good play.

In the longer term I still think there will be another shake out in equity markets. The Euro situation while somewhat quieter is a sleeping giant of a problem. It maybe that a double dip does not occur in Europe bailed out by China and Emerging Markets. However, the austerity packages are definitely causing extreme economic pain for many countries. One fears that there will inevitably be social unrest this summer. To what degree may be the deciding factor for markets.

Elsewhere, notably gold made another high of 1263.75 against the dollar with little or no fuss. One suspects that given the excuse of some crisis we could finish the year much higher. On the other hand maybe it was just all those World Cup medals and football WAGS presents.They love their bling.

Category: Market Comment/Analysis
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