Sterling hits 10 week high as JP Morgan Chase earning reports buoy risk sentiment

London - 15 July 2010

- Looking towards next week, Travelex Global Business Payments expects risk appetite to be short-lived -

Sterling hit a 10 week high against the US dollar this morning, rising 0.65% to $1.5362 as JP Morgan & Chase’s corporate earning reports beat expectations and helped to lift equity markets. Earnings per share in Q2 came in at $1.09, compared with forecasts of $0.71.

Tiffany Burk, European Market Analyst at Travelex Global Business Payments comments, “Improved risk appetite lifted sterling this morning as JP Morgan & Chase’s corporate earning reports beat market expectations. Sterling was also buoyed by Pimco’s increased optimism in investing in Britain, after they said they were reversing their decision to cut its holding of UK debt.

“However, despite recent gains, I think risk appetite will be short-lived and sterling may fall back as the $1.54 mark approaches. I expect to see substantial resistance to further improvements, especially when looking towards next week’s agenda.

“Nervousness over the UK release of Q2 GDP data may prompt a round of profit taking in long sterling positions. With Europe looking towards the results of the bank stress tests, risk appetite may dry up, as criticism of the process is likely to run high. This will temper the optimism we saw this week in the Eurozone, after Greece, Spain and France saw good demand for freshly issued debt."

Burk concludes, “On the other hand, the downside for sterling may be somewhat limited because US housing figures are released next week. The figures will fully reveal the impact of government stimulus withdrawal, and potentially push the sector closer to double-dip territory. This may leave interest in US dollar purchases at a minimum.”

Become a bobsguide member to access the following

1. Unrestricted access to bobsguide
2. Send a proposal request
3. Insights delivered daily to your inbox
4. Career development