httpvh://www.youtube.com/watch?v=u64Hi_6bWVA

The details of the European stress tests were published late Friday and, surprise surprise, there apparently is little cause for concern. Germany’s Hypo and Greece’s AIT have been singled out as banks that would need additional funding were this scenario to become real life but that is not the point. The point is this test was about as stressful as losing your wallet; yes it’s annoying but in the grand scheme of things nobody died. The weekend papers were full of banking analysis so I will not attempt to duplicate it suffice to say that risky assets loved the results as much as I love pocket squares and pushed GBPUSD above the 1.54 level.

GBP had started the day on the front foot as the Q2 estimate of UK GDP surprised massively to the upside. The preliminary reading was published at 1.1% compared to an expected 0.6%. This had already been hinted at in Thursday’s retail sales release but is still a welcome surprise. It does however look like this will be the top for a while as business surveys and further fiscal and liquidity tightening expected in the 2^nd half of the year.

The release also heightened expectations of an interest rate hike in the near future in the UK. We are still happy with our expectation of a Feb ’11 move and nothing sooner. It is interesting to note however that the Ernst & Young Item Club, a respected economic analysis unit, are saying that the Bank of England should keep rates at 0.5% until 2014. Long odds are available from your friendly neighbourhood bookmaker.

One way of keeping liquidity available is to force banks to lend, something Vince Cable is rumoured to be looking at at the moment according to today’s FT. Small companies are set to be able to benefit from Cable’s plans through measures as drastic as lending targets for UK banks although the coalition has been quick to comment that these ideas come from a ‘very green green paper’.

The data calendar is thankfully nice and light today with only US new home sales of particular note. With the currency trading world moving away from a risk-on/risk-off model and more towards individual economic prospects the USD has been losing ground on weak data; expect further greenback weakness if this continues. 

Today we have published our ‘World First Economic Calendar’ (attached to this email). This calendar seamlessly fits into your existing Outlook calendar and details the important releases for upcoming week.) This does however not work in Outlook 2003 or on a Mac however development is going into releasing calendars in those formats. Simply open the attachment (selecting replace if you downloaded last week’s)

The details of the European stress tests were published late Friday and, surprise surprise, there apparently is little cause for concern. Germany’s Hypo and Greece’s AIT have been singled out as banks that would need additional funding were this scenario to become real life but that is not the point. The point is this test was about as stressful as losing your wallet; yes it’s annoying but in the grand scheme of things nobody died. The weekend papers were full of banking analysis so I will not attempt to duplicate it suffice to say that risky assets loved the results as much as I love pocket squares and pushed GBPUSD above the 1.54 level.

GBP had started the day on the front foot as the Q2 estimate of UK GDP surprised massively to the upside. The preliminary reading was published at 1.1% compared to an expected 0.6%. This had already been hinted at in Thursday’s retail sales release but is still a welcome surprise. It does however look like this will be the top for a while as business surveys and further fiscal and liquidity tightening expected in the 2^nd half of the year.

The release also heightened expectations of an interest rate hike in the near future in the UK. We are still happy with our expectation of a Feb ’11 move and nothing sooner. It is interesting to note however that the Ernst & Young Item Club, a respected economic analysis unit, are saying that the Bank of England should keep rates at 0.5% until 2014. Long odds are available from your friendly neighbourhood bookmaker.

One way of keeping liquidity available is to force banks to lend, something Vince Cable is rumoured to be looking at at the moment according to today’s FT. Small companies are set to be able to benefit from Cable’s plans through measures as drastic as lending targets for UK banks although the coalition has been quick to comment that these ideas come from a ‘very green green paper’.

The data calendar is thankfully nice and light today with only US new home sales of particular note. With the currency trading world moving away from a risk-on/risk-off model and more towards individual economic prospects the USD has been losing ground on weak data; expect further greenback weakness if this continues.