There’s no shortage of individual catalysts to drive foreign exchange prices midweek although the single conclusion is a strengthening of the U.S. dollar to its strongest in three weeks. A series of Odd Couples is behind today’s market action as dealers attempt to pin down the relative strength of domestic units against the dollar.
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British pound – It appears that fiscal spending cuts are starting to show up in Britain’s unemployment data. The May reading for jobless claims was far worse than expected as 19,600 more claimants signed up for benefits. An April revision means that for the two months claims rose by 38,000 while before today’s number economists were expecting just half that number. The Bank of England as a result faces less pressure than before the report to start tightening monetary policy as a rising pace of unemployed and rising interest rates would be a rather Odd Couple indeed. The pound managed a gain per euro to 87.87 pence while it also began a tumble from its bed this morning that has gone well through the floorboards and into the cellar today judging by the chart. The pound is down by more than a penny against the dollar and reached a low at $1.6227 at its recent worst moment.
Euro – The European Odd Couple remains German politicians hell-bent on railroading the Greek government to de facto default and a French-backed ECB increasingly alarmed by the reality of the implications of such default. News seeping out of Brussels-based discussions indicates that horns are locked at the table between German lawmakers insistent that bondholders burden the yolk of Greek fiscal insolvency and forward-looking ECB members pointing to the response by ratings agencies of a maturity extension for maturing Greek debt. The euro fell out of bed in response as sentiment waned once more. The drop this time was enough to send the single currency crashing through its lowest point in two weeks and recently traded at $1.4268.