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Global Exchange

Exchange Rates for Sunday 5th July 2015

Tension over Eurozone debt eases with reassurances from the ECB

The tension of the last few days eased yesterday despite a disappointing German government bond auction. €5 billion of bonds were on offer but there were bids for only €4.11 billion of them. The German Finance Agency shrugged off the matter, saying in an email that the sale was a "good result" in the context of "slightly increased uncertainty" on markets. Less easy to explain away was Italy's auction of one-year debt, for which it had to pay 2.84% interest, more than double the 1.405% it cost to shift a similar issue four weeks ago.

Longer-term Italian and Spanish government debt edged lower. Helping them down was a comment from European Central Bank executive director Benoit Coeure who more-or-less said the ECB will intervene if required. He said "we have an instrument, the securities markets programme, which hasn't been used recently but it still exists." It was the broadest possible hint that the ECB would buy more Spanish (or other) government debt if it felt it necessary to do so.

In the US yesterday the Federal Reserve's Beige Book reported a modest to moderate pace of expansion since the last report was compiled, with manufacturing doing well, particularly the auto industry and technology. The report hinted that the Fed will not jump the gun in terms of tightening monetary policy, especially given the ongoing high levels of spare capacity in industry/services and from the labour market.

This morning the Australian dollar jumped a cent higher following the latest employment data. After a loss of 15,400 jobs in February the Australian economy generated 44,000 new ones in March. Because the number was so much bigger than the 6,000 they had been expecting, investors bought the Aussie.

Today sees the release of the UK trade balance for February. The net trade deficit has been on an erratic but improving path of late, and though it is expected to slightly deteriorate this month, it is expected to be far smaller than the same month a year ago.

In the US, we have Feb trade numbers as well, combined with jobless claims data and the March PPI figures. With the sparse data calendar, currencies will again be concerned by renewed issues in Eurozone sovereign debt. 

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