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Positive start for UK economy this summer but not Spain

Consumer confidence has unexpectedly dropped in the USA and Spain has credit rating downgraded but it’s looking positive for UK currency.


Sterling failed to break above the 1.5700 level yesterday against the Dollar and has now fallen back below 1.5600. Positive CBI sales data was released, the forecast had been for a further drop of 7 percent, however the figure released was up 21, representing the best figure in over a year.

This is promising news and with more spending expected over the summer thanks to the Jubilee and Olympics this could be the start of a short to medium term recovery in the retail sector. The measure of expected sales for June is also high at 25, with retailers now feeling confident of a faster expansion. Sterling has remained mainly range bound against the Euro, now holding just above 1.2500.


Data released from the US yesterday showed house prices were down 2.6 percent, in line with expectations. Consumer confidence unexpectedly dropped 4 percent to 64.9 for May, although this hasn’t prevented USD from making gains across the board.

Overnight US firm Egan Jones downgraded Spain’s credit rating which seemed to give market makers the excuse they needed to sell more European assets, the rate of 1.2450 is the lowest we have seen since July 2010.


The only data from Europe yesterday was German price readings with the cost of exports and CPI data both showing a reduction of 0.5 percent. The Euro continues to struggle against the USD trading below 1.2450 on Tuesday.

The concern for the Spanish economy as a whole, especially the banking sector, are leading to most investment taking place elsewhere, especially in safe haven areas like the US. This worry over Spain will mean today’s bond auction in Italy is more important, a sharp rise in yields would indicate that the fear of contagion has risen and could force the Euro weaker.

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Morning Market Rates: (Please note: These are indication prices only, they are not offer rates)

GBP/USD: 1.5524

GBP/EUR: 1.2467

GBP/AUD: 1.5866

GBP/CHF: 1.4980

GBP/ZAR: 13.000

GBP/JPY: 121.20

USD/JPY: 77.847

USD/ZAR: 8.3408

EUR/USD: 1.2400

EUR/ZAR: 10.385

GBP/NZD: 2.0402

GBP/CAD: 1.5929

GBP/AED: 5.6997


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