Finexo Forex news and Updates

• FX: EURUSD dipped to 1.3882 and might look ready for a bounce, but the 50% fibo level at 1.3840 might be “magnetic”.

• Fixed Income: Again large ranges, but no direction in 10- years.

• Stocks: European session down 0.5%, but US and APAC session both around 1% higher.

• Commodities: Gold, Silver and Crude all bouncing cautiously higher from yesterday’s close.

• Q2 GDP releases from Japan overnight show that the country’s economy has contracted at an annualized rate of 3%, with the slowdown rate the steepest since the last recession in 2001. A negative growth figure in Q3 would see the country technically enter a new recession.

• The markets globally are enjoying from a relief rally as speculation has grown that Lehman Brothers would be bought by another financial institution.

• The markets will be keenly observing the US August Retail Sales due out at 12:30 GMT. For the core, autoless figures, the median surveyed forecasts are pointing to a drop of 0.2%, which, if materialized, would be the first negative release in 6 months.

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GBP/USD – 2 year high for the dollar in sight of Britain's frail economy

Data on the UK's gross domestic product has revealed no changes in the second quarter at 0.2% quarterly growth, its lowest in 16 years. This rose investors' expectations that the Bank of England would cut interest rates. This as well as weak data from the European region gave support to the dollar.

Despite the weakening of global economies and the resulting boost of the dollar, traders remained skeptic about the continued rise of the dollar due to the frail U.S. financial system. Traders will be closely monitoring U.S. housing data to be released this week, as well as new developments about the future of Lehman Brothers investment bank and mortgage giants Fannie Mae and Freddie Mac.

I believe that market focus for the near future will be on the sterling and oil prices – two key elements in keeping the dollar stable. Oil prices fell the steepest fall in 4 years on Friday to below $115, thus increasing the dollar's gains. Moreover, Investors will act carefully at this week's housing data, which might limit the dollar's gains, yet they have no reason to sell the dollar for now.

The sterling fell to $1.8415, its lowest rate since 2006. This slide brought about unexpected short positions in the sterling, perhaps making it possible for the currency to recover.

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