Currency markets show volatility, but remain in the place.
The British pound failed to hold at the level reached on Tuesday. Breakthrough above the maximum of 3 June attracted speculative players, but sterling failed to extend gains above the level at 1.6740/50. UK GDP data showing much worse than expected struck a heavy blow to market pound-bearish traders and led to pound-selling throughout all day. UK GDP contraction
reached the maximal figure since 1958 year, as the recession hit all sectors of the British economy. UK GDP declined 2.4% as compared with the last three months of 2008 against the consensus of -1.9. Pound selling was intensified at the end of the European session on falling stock markets and rising risk aversion, but pound/dollar has held above 1.64.
Euro has also lost position against the US dollar, falling from the session high at 1.4151 to 1.40. According to the Federal Employment Agency in Germany the Europa-wide largest labour market continues worsening but in slower pace than experts expected: the number of unemployed in Germany rose 31 000 against expected 50 000. In addition the inflation tempo in the euro zone slowed down by 0.1% to -0.1% in June on year-over-year basis. This consumer inflation expectation in June became the first negative figure in the last 12 years.
Meanwhile US economic data came out in contradiction. Chicago PMI rose to 39.9 versus 34.9, pointing out that the pressure on the manufacturing sector continued to weaken. Chicago PMI increase gives greater confidence in the forecast for the ISM index in the manufacturing sector, which will be published on Wednesday. However consumer confidence state disappointed. The June consumer confidence index fell to 49.3 against a revised figure 54.8 in May.
Japanese currency is declining the third day against the U.S. dollar as the launch of investment trusts significantly contributed to massive yen selling. However Tankan Large Manufacturers Outlook jumped up from minus due to recovery of exports and production. Such an improvement in sentiment was the first in the last 2.5 years, as the results of the Bank of Japan's Tankan report showed.
