US Banks Pass The Test – USD Exchange Rates
It was confirmed last night that all the major US banks passed the stress tests that have been carried out in order to confirm that the banks are in a more robust position than they were before the financial crisis. However, despite passing the tests the major banks including Bank of America and Morgan Stanley only just scrapped past the test as it was shown that if a similar financial crisis seen back in 2007/8 was seen again then they would not be able to return capital to shareholders. In fact the test showed that in the scenario run of a financial crisis the Bank of America would make a loss of $49.1bn and its capital ratio would fall to just 6%. This is a real concern for the US, the banks and their clients however, the fact the banks passed the tests has been taken as a positive and the Dollar has continued its recent run of strength against Sterling meaning we are still heading back towards the 1.60 mark. It does seem that we have hit the peak against the USD when it breached the 1.67 mark and since then the rates have slowly moved back towards the pivital 1.60 level.
Todays Economic Data – GBP and CAD Exchange Rates
Today there is very little economic data out for the UK but Public Sector Net Borrowing is out at 9:30am and this will give a good indication as to how the Government are controlling the level of spending, the lower the figure the better for Sterling exchange rates. The data this afternoon is mainly focussed on Canada and the Canadian Dollar with their inflation figures and retail sales number both due for release and expected to show a decline which may give Sterling Canadian Dollar exchange rates a boost. Should the data not come out as expected and fall further than predicted then it really could send GBP CAD exchange rates right up towards the 1.86 level, however if their retail sales and inflation data is better than thought then it may mean rates start heading back down below the 1.84 levels.