Market Report

Yesterday we saw the IFO business confidence survey results, which came out at 105, slightly ahead of the expected 104.6. The Euro strengthened slightly on the back of this because after the ZEW earlier in the week the markets were bracing themselves for another Euro negative figure.

As discussed yesterday there is very little in the way of economic data being released, but we will see the revised UK GDP figures which is expected to be unchanged. Later today FED chairman Bernanke is speaking in Kansas on subjects not directly related to monetary policy. However any comments made relating to the economy might move the markets.

The second weekend of Premiership matches kick off this week, my tip for an upset is Manchester City at home to Arsenal!

Have a nice long weekend.

DE

Yesterday saw the release of the CBI industrial order balance for August, it was expected to come out as -12, but came out as -8. This coupled with the weaker than expected US existing homes sales causing the Dollar to weaken, pushed GBPUSD back up towards 1.90. Existing home sales are not normally a big focus for FX markets however in this environment where there is an extreme focus on the trade off between the risks of higher inflation and weaker economic growth, the minutiae of influences on domestic demand are being scrutinized for clues towards the ultimate top of US interest rates. Despite this weakening, we have this morning seen the Dollar rally back to where it was before the decline on the back of the German business confidence release.

This morning we saw the IFO business confidence survey results, which came out at 105, slightly ahead of the expected 104.6. The Euro has strengthened slightly on the back of this because after the ZEW earlier in the week the markets were bracing themselves for another Euro negative figure.

The IFO was billed as the most important economic data this week, so that should give you a sense of what we are expecting for the rest of the week!

As for the sport last night, Chelsea failed to beat Middlesborough which hopefully signifies a more open Premiership race this season. Or am I delusional

DE

Yesterday Sterling moved up nearly half a percent after weak German data hurt Euro zone rate rise expectations. Investor's attitude in Germany is at a 5 year low accord to the ZEW economic research institute, although the current conditions index showed an improvement, highlighting a level of pessimism about the road ahead that may or may not come to fruition.

With yesterday poor data from the Euro zone which lead to a 60 point the bounce in GBPEUR, in our opinion this is an excellent time to sell Sterling and buy Euros. On top of the recent weak UK data which seems to have dented speculation of higher UK interest rates from the current 4.75 percent, following a surprise hike earlier this month.

There is little data due today. CBI industrial order balance for August, is expected to be -12, compared to -11 in July. US existing homes sale looks to be on the plus side for the dollar, this may trigger some short team Dollar strength, but overall the markets are quite thin and with little data to provide direction the impetus could come from the unwinding of positions and if this is the case it is likely to be USD positive

DH

The data calendar from the US is very light this week and as such we have seen few maintained directional moves. The overall bias for the USD is still negative from a fundamental perspective as rates look to have peaked and growth has tempered. The Economic situation in the UK is similar despite the MPC's rate hike growth is firm but the downside risks are certainly growing. Taking the EUR out of the equation, speculative positioning is likely to have a big impact from here as holiday induced illiquidity exaggerates moves.

The spec market is very short of USD against both EUR and GBP. In my opinion this week we will see a more extended slide in GBP against both EUR and USD as positions start to unwind. The main driver this week though is likely to be the EUR as the only real data of note is business confidence data from the Euro zone.

ZEW today and IFO on Thursday should provide the market with impetus, though the 8.6% advance in the value of the EUR this year may spur back expectations of further rate rises and may also dampen business expectations going forward.

VC

Friday saw both GBP/USD and GBP/EUR coming under pressure as UK economic woes began to come to the fore in the light of the significantly weaker UK retail sales data. The Sunday Times this weekend further highlighted some of these woes in the same fashion that we have been alluding to in our editorials over the last couple of weeks.

The US dollar dropped against the Euro over fears that the continued raising of interest rates has slowed growth in the US and US woes are battling out against UK woes in GBPUSD with the USD weakening back late Friday and into this morning.

The figures to look out for this week are the existing and new home sales numbers from the US on Wednesday and Thursday respectively. Most experts believe that the market is slowing, and with the housing markets being an area of particular concern a weak number may bring USD weakness back to the fore.

Expect a low key day in the markets today!

As for the opening day of the Premiership weekend, I am a very disappointed Tottenham fan!

And as for the cricket - what a farce!

DE