Market Report

The markets may have seemed quiet due to the lack of major data being released yesterday, but today will be a different story!

Today at 10:30 we have the consumer confidence data released in the UK.

At 15:00 we have the FED chairman Bernanke talking on housing and monetary policy. At 14:45 we have the Chicage PMI, and at 15:00 we have Michigan consumer sentiment index and July factory orders.

I think that with the huge amount of important data, keep an eye on GBP/USD and take advantage of it where possible!

DE

As the great British summer time draws to a close, the appetite for risk returns.

Although investors are cautious, Sterling strengthened on Wednesday as higher stock markets signalled a tentative return to risk appetite and a move back into the carry trade, where investors borrow low yielding currencies like the yen to invest in higher yielding assets. This benefits the pound which has the highest interest rates in the Group of Seven industrialised nations.

The U.S. economic rebound in the second quarter was stronger than previously estimated as exports surged and business spending grew, economists said before revised government figures today. So if as positive as expected, we could see Dollar strength before the day is out.

LR

The Great British pound eased against the dollar, the Euro and the yen on as renewed weakness in global equity markets kept investors cautious about risky carry trade investments in the high-yielding pound.

A sell off in U.S. equities on Monday and the consequent weakness in Asian and European bourses put the spotlight back on risk aversion which had been calmed somewhat by central banks worldwide pumping cash into the banking system to relieve the squeeze in money and credit market.

In foreign exchange markets, risk aversion tends to prompt investors to exit risky carry trade positions where purchases of high-yielders like sterling are funded by cheap borrowing in currencies such as the yen.

UK housing data on Thursday -- including Nationwide's house price survey for August and mortgage lending figures for July -- could give sterling new direction. Until then, though, analysts reckon the pound is likely to track swings in risk appetite and moves in equity markets.

DH

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