Friday 24/07/2009
• Risk appetite gains momentum-sterling hits 3 week high against the dollar
• Greenback sees aggressive sell off against majors as equity markets rally
• Euro has mixed day against majors—short term sell off blamed for losses
• World stock markets buoyant—corporate earnings spur investors to buy
• Commodity currencies continue bull run -Aussie, Kiwi & Cad dollars rally
US Dollar:
The dollar fell to a three week low on the pound, seven week low against the euro and Canadian dollar yesterday as riskier trades gained momentum and stocks rallied. The dollar fell to $1.6585 on sterling and just under the $1.43 level on the euro. Higher-yielding and riskier currencies are in favour after positive US data releases on Thursday and continued signs of economic recovery in second quarter earnings reports spurred risk appetite. That has led the safe-haven greenback and yen to sell off. Better than expected weekly US jobless claims was one of many numbers to come out which contributed to the bucks fall. We have seen the trend carry through into Asian trade this morning with massive dollar selling by big Japanese banks taking profit after the greenbacks rise over the previous weeks. It seems a large volume of dollar selling by two big Japanese banks was the notable move of the Asian market, which then prompted exporters and hedge funds to follow suit. Be aware of this aggressive move though as there are some dealers with the view that the greenback may get a boost from Japanese trust funds early next week. These funds have been rumoured to be preparing to invest in dollar-denominated assets very soon.
Data 15.00: University of Michigan Confidence expected at 65.0 from 64.6.
Pound:
Sterling was definitely one of the main gainers in the foreign exchange markets yesterday as continued rising risk appetite saw the pound sweep aside the dollar and euro with ease. We have seen a strong correlation with regards to the main world currencies and equity markets over the last few month, which looks set to continue for the short term at least. The Dow rallied, up nearly 2200 points and crossed the 9000 level for the first time since January and the FTSE is now above the 4520 level as players come out of the safe haven status of the dollar and buy into riskier trades, rallying the higher yielding currencies. Cable soared more than two cents to push through the $1.65 level, hitting an intraday high of $1.6585, and the pound saw a similar gain against the euro with sterling hitting an intraday high of 1.1664. This rally in the value of the pound has clearly been driven by the rise in risk appetite, whether externally driven or domestically driven, with supportive news from the economy. The worry is, the latter seems to be the lesser factor. In these kind of markets we have seen Currency Today clients benefit from placing ‘Buy Limit Orders’ capturing a spike in foreign currency purchases.
Data 09.30: GDP QoQ expected –0.3% from –2.4% & YoY expected –5.2% from –4.9%.
Euro:
The euro took a nose dive against the pound yesterday as the risk appetite animal continued to roar through the currency markets. At present, the euro seems to be slightly lower down the pecking order against the pound when the riskier trades creep to the top, which has seen the single currency post a 1% loss against sterling, pushing EUR/GBP down to 0.8573. Against the dollar there was a different picture, with the euro reversing course against the buck for the second time during a volatile New York session yesterday. The euro fell back from a fresh seven week high of $1.4292, approaching its 2009 high of $1.4339. Once the euro broke below
the closely watched technical level of $1.4260, traders sold the currency more aggressively.
Data 09.00: E/Zone PMI Manuf, Services & Composite. German IFO Expectations & Business Climate.
General:
• Commodity currencies have continued their push higher in the currency markets on the back of the rise in risk appetite. The Canadian dollar has also benefitted from the latest Canada Monetary Policy Report.
Friday, 24 July 2009
Thursday, 23 July 2009
Sterling takes back losses against majors riskier trades back on
Thursday 23/07/2009
• Sterling takes back losses against majors—riskier trades back on
• Asian players sell the dollar as stock markets continue to rally
• BoE minutes gives small boost to sterling—outlook on economy brighter
• Eurozone sees industrial orders weaken—GBP/EUR moves cent higher
• Yen takes a beating from euro & dollar on technical selling
US Dollar:
Stock markets continued their rally yesterday with Asian markets picking up the most gains, leading to a sell off for the dollar and yen. Asian players sold off the greenback against the euro and sterling, which has been seen many times before when the markets risk appetite picks up. This saw a fall in the dollars value by over two cents on the pound to break through the $1.65 level. The dollar also fell down on the euro as a cent was given up for EUR/USD to trade over the $1.42 level. The snapback rally over the last few days has been very much driven by second-quarter results coming in ahead of guidance, particularly in the US. Be aware that risk-trading trades have a habit of disappearing as soon as they surface. Appetite for risk could decrease if major US firms earnings due out later today are weaker than expected, and there are still worries about what will be the outcome of US CIT Group’s liquidity problems.
Data 15.00: Existing Home Sales expected 0.6% from 2.4%. Speakers 14.30: Fed's Tarullo.
Pound:
The pound managed to halt the slide against the euro and dollar seen earlier in the week yesterday as stock markets held firm, with Asian markets rallying overnight. The riskier trades were back on as investors sold off the safe haven currencies such as the yen and dollar in favour of the riskier currencies including the pound. This saw cable rally over two cents as we saw GBP/USD push back over the $1.65 level. Voltrex saw limit orders hit out at these levels through VFX (our online trading platform). There was also a cent gained on the single currency with GBP/EUR testing the 1.16 level. The pound was given a slight boost in yesterday’s morning session after the minutes of the latest Bank of England meeting suggested that , although the bank could still extend its quantitative easing next month, the outlook for the UK economy is probably a little brighter. Well, take that with a pinch of salt, as we have seen over the last few months, it doesn’t take a lot to spook the markets.
Data 09.30: Retail Sales expected 0.3% from –0.6% & BBA Loans for House Purchase.
Euro:
The euro gave up gains against the pound made earlier in the week as EUR/GBP gave up over 1% to trade at 0.8620. This seemed to be on the back of a combination of the BoE minutes which pointed to a slight recovery in the UK, the risk appetite move on the world currency markets and weaker than expected E/zone industrial orders. The factory orders showed a fall of 0.2% in May where economists were expecting a rise by 2.0%. The risk appetite move in the major currencies did however see the euro take up the reigns against the dollar as we saw a cent gained, pushing EUR/USD to trade close to the $1.4250 level.
Data 09.00: Already out E/Zone Current Account came in at –1.2B.
General:
• The yen took a beating in Asian trade this morning from the euro and dollar on technical selling and risk appetite coming to the forefront in the currency markets.
• Oil is higher as investors focused on Fed Chairman’s cautiously hopeful comments about the US economy, pushing Nymex crude up to $65.67 per barrel.
• Sterling takes back losses against majors—riskier trades back on
• Asian players sell the dollar as stock markets continue to rally
• BoE minutes gives small boost to sterling—outlook on economy brighter
• Eurozone sees industrial orders weaken—GBP/EUR moves cent higher
• Yen takes a beating from euro & dollar on technical selling
US Dollar:
Stock markets continued their rally yesterday with Asian markets picking up the most gains, leading to a sell off for the dollar and yen. Asian players sold off the greenback against the euro and sterling, which has been seen many times before when the markets risk appetite picks up. This saw a fall in the dollars value by over two cents on the pound to break through the $1.65 level. The dollar also fell down on the euro as a cent was given up for EUR/USD to trade over the $1.42 level. The snapback rally over the last few days has been very much driven by second-quarter results coming in ahead of guidance, particularly in the US. Be aware that risk-trading trades have a habit of disappearing as soon as they surface. Appetite for risk could decrease if major US firms earnings due out later today are weaker than expected, and there are still worries about what will be the outcome of US CIT Group’s liquidity problems.
Data 15.00: Existing Home Sales expected 0.6% from 2.4%. Speakers 14.30: Fed's Tarullo.
Pound:
The pound managed to halt the slide against the euro and dollar seen earlier in the week yesterday as stock markets held firm, with Asian markets rallying overnight. The riskier trades were back on as investors sold off the safe haven currencies such as the yen and dollar in favour of the riskier currencies including the pound. This saw cable rally over two cents as we saw GBP/USD push back over the $1.65 level. Voltrex saw limit orders hit out at these levels through VFX (our online trading platform). There was also a cent gained on the single currency with GBP/EUR testing the 1.16 level. The pound was given a slight boost in yesterday’s morning session after the minutes of the latest Bank of England meeting suggested that , although the bank could still extend its quantitative easing next month, the outlook for the UK economy is probably a little brighter. Well, take that with a pinch of salt, as we have seen over the last few months, it doesn’t take a lot to spook the markets.
Data 09.30: Retail Sales expected 0.3% from –0.6% & BBA Loans for House Purchase.
Euro:
The euro gave up gains against the pound made earlier in the week as EUR/GBP gave up over 1% to trade at 0.8620. This seemed to be on the back of a combination of the BoE minutes which pointed to a slight recovery in the UK, the risk appetite move on the world currency markets and weaker than expected E/zone industrial orders. The factory orders showed a fall of 0.2% in May where economists were expecting a rise by 2.0%. The risk appetite move in the major currencies did however see the euro take up the reigns against the dollar as we saw a cent gained, pushing EUR/USD to trade close to the $1.4250 level.
Data 09.00: Already out E/Zone Current Account came in at –1.2B.
General:
• The yen took a beating in Asian trade this morning from the euro and dollar on technical selling and risk appetite coming to the forefront in the currency markets.
• Oil is higher as investors focused on Fed Chairman’s cautiously hopeful comments about the US economy, pushing Nymex crude up to $65.67 per barrel.
Wednesday, 22 July 2009
UK Threat of drastic tax rises and spending cuts after an election next year
• Risk concerns reappear in the financial markets
• Financial conditions remain stressed despite stronger corporate earnings
• UK sees the release of MPC minutes this morning
• UK leads Europe in number of distressed companies#
US Dollar:
The dollar has regained recent losses against the pound and Euro trading into 1.6332 and 1.4178 respectively. This comes as concerns about risk resurface in the market. Shaun Osborne, chief currency strategist at TD Securities talking about Ben Bernanke’s (FED chairman) testimony said yesterday "Although the Fed chairman talked about exit strategies, his emphasis was on economic risks and this cautiousness did not sit well with currency traders," This risk concern was also highlighted by Kathy Lien, director of currency research at GFT in New York "Financial conditions remain stressed and despite stronger earnings, banks could face significant further losses," she said. To be fair this does not come as any great surprise to me as investors continue to move in and out of riskier currencies highlighting the fickleness of the FX markets.
Data : Bernanke gives second testimony at 15:00. Crude oil Inventories exp –1.9M Prev –2.8M
Pound:
The pound has been in gradual decline against the Euro this week moving down from 1.16 on Monday to the low 1.15 area this morning. We have also seen a downward move against the USD with the rate moving from a recent high of 1.6559 to it’s current level of 1.6322. The discussion on UK government spending is continuing to do the rounds this morning with The Times reporting a the looming threat of drastic tax rises and spending cuts after the election next year as the government finances remain in the red for at least another four years. The guardian also reported that the UK is home to more distressed companies than any other country in Europe. Its comes as no surprise that this less than optimistic news has hindered sterling further this morning.
Data: 9.30 MPC Meeting Minutes 11:00 CBI Industrial Orders exp –46 prev –51
Euro:
The Euro has moved down against the USD this morning with the pound as the markets concern over risk arises once again. Yesterday, the euro reached its highest level in seven weeks at $1.4278 and then retreated to end lower against the dollar, after risk-sensitive currencies in general reversed direction and ceded ground to the USD. Industrial orders (Change in the total value of new purchase orders placed with manufacturers) will provide a further insight into the manufacturing sector expected to see a pick up and signal of some recovery.
Data: Industrial New Orders 10:00 exp 1.9% Prev –1.0%
• Financial conditions remain stressed despite stronger corporate earnings
• UK sees the release of MPC minutes this morning
• UK leads Europe in number of distressed companies#
US Dollar:
The dollar has regained recent losses against the pound and Euro trading into 1.6332 and 1.4178 respectively. This comes as concerns about risk resurface in the market. Shaun Osborne, chief currency strategist at TD Securities talking about Ben Bernanke’s (FED chairman) testimony said yesterday "Although the Fed chairman talked about exit strategies, his emphasis was on economic risks and this cautiousness did not sit well with currency traders," This risk concern was also highlighted by Kathy Lien, director of currency research at GFT in New York "Financial conditions remain stressed and despite stronger earnings, banks could face significant further losses," she said. To be fair this does not come as any great surprise to me as investors continue to move in and out of riskier currencies highlighting the fickleness of the FX markets.
Data : Bernanke gives second testimony at 15:00. Crude oil Inventories exp –1.9M Prev –2.8M
Pound:
The pound has been in gradual decline against the Euro this week moving down from 1.16 on Monday to the low 1.15 area this morning. We have also seen a downward move against the USD with the rate moving from a recent high of 1.6559 to it’s current level of 1.6322. The discussion on UK government spending is continuing to do the rounds this morning with The Times reporting a the looming threat of drastic tax rises and spending cuts after the election next year as the government finances remain in the red for at least another four years. The guardian also reported that the UK is home to more distressed companies than any other country in Europe. Its comes as no surprise that this less than optimistic news has hindered sterling further this morning.
Data: 9.30 MPC Meeting Minutes 11:00 CBI Industrial Orders exp –46 prev –51
Euro:
The Euro has moved down against the USD this morning with the pound as the markets concern over risk arises once again. Yesterday, the euro reached its highest level in seven weeks at $1.4278 and then retreated to end lower against the dollar, after risk-sensitive currencies in general reversed direction and ceded ground to the USD. Industrial orders (Change in the total value of new purchase orders placed with manufacturers) will provide a further insight into the manufacturing sector expected to see a pick up and signal of some recovery.
Data: Industrial New Orders 10:00 exp 1.9% Prev –1.0%
Thursday, 4 June 2009
When will the penny drop? Prospects for the US dollar
“For those of you that have a particular interest in the USD this post provides some detailed information. Paul Dawson a good friend of mine from the Institute of Economic Affairs (IEA) http://www.iea.org.uk/ provides us with this information”.
It is very difficult to predict turning points in history. George Soros was correct in 1992 IN SAYING that sterling could not survive as a member of the European exchange mechanism, making a lot of money in the Process. Although he has not been as lucky with his Russian investments to say the least.
I like to look at the lessons of history and have been intrigued by the recent visit to china undertaken by the US treasury secretary Tim Geithner. I am prepared to stick my neck out amidst speculation about establishing a new world currency. China sorts out its economy by moving away from exporting and stimulating domestic demand while at the same time reforming its quasi governmental banking sector then the Chinese currency - the twenty first could become the next major reserve currency by the middle Of the twenty first century supplanting the dollar which has assumed this role since World War 2.
Tim Geithner gave a lecture at Peking University at which students openly questioned him about the safety of Chinese assets held in the US and laughed when he replied,
"Chinese assets are very safe." ref Financial Times 2/6/2009
Although many might argue that it is too early to say this could be seen as a turning point the economic facts confronting the US are not sanguine. At some point, currency markets and the individuals who operate within them will realise that something significant has changed in the way in which the US economy operates and after the proverbial penny drops their reaction will be swift and dramatic.
Currently the US and Chinese economies exist in a symbiotic relationship with US consumers buying cheap goods made in China (rather than the US as was once the case) and the Chinese investing the proceeds in US assets. According to the FT of 2/6/2009 94% of their foreign currency assets are held in US$ assets and only 6% are directly invested. Also, 70% of the $2,000 billion in foreign currency assets are held in US government bonds.
For the Chinese and other overseas governments the dollar is a global currency and US overnment bonds are perceived to be both safe and highly liquid. What the Chinese government and other investors are starting to realise is that the US economy is not the hegemon it once was and at some point they will decide to begin switching out of dollars and US bonds. This will not happen overnight as the sums involved are very large and as with trying to get a supertanker to change course any movements will initially be difficult to e.g. have also to decide where else they would like to invest as e.g. the euro has its own problems and gold is limited in supply.
Concerns about how long the US would remain a superpower were first raised by historian Paul Kennedy in his 1987 book "The Rise and Fall of the Great Powers" where he predicted that US military overstretch around the world and the cost of running its military machine would undermine the rest of the economy. Events did not turn out like that but more recently both Alan Greenspan in "The Age of Turbulence" and Niall Fergusson in "Colossus" have both expressed grave concerns about spiraling US public debt arising not just from defence commitments but more worryingly from growing healthcare and social security costs as the postwar baby boom generation starts to retire.
The Rise and Fall of the Great Powers: Economic Change and Military Conflict from 1500-2000 (Paperback) Paul M. Kennedy (Author)
The concern is that notwithstanding the pledge by the Obama administration to reduce the fiscal deficit to 3% of GDP (whereas in 2009 it is expected to reach nearly 13% of GDP - ref FT 3/6/2009) this will involve some very messy political decisions and the electoral cycle may force such decisions to be put off until another day.
The other problem is that the need to issue more public debt during an economic downturn could at some point precipitate a re-rating of US debt by the credit ratings agencies. Should this happen it would have a catastrophic effect on investor confidence. Bond yields would rise as their prices fell and the US government would have to pay higher interest rates in order to secure the necessary funding. The other danger is that as more debt is issued the cost of paying the interest on that debt can rise exponentially. These concerns have been raised by the US bond fund manager PIMCO and I attach a link to the recent Investment Outlook written by Bill Gross.
Staying Rich in the New Normal
Large scale debt issuance is also inflationary and for those of you who appreciate country music May I take this opportunity to draw your attention to a new song by Merle Hazard with the lyrics,
'Inflation or deflation,
Tell me if you can,
Will we be Zimbabwe or will be Japan"
http://www.merlehazard.com/Merle_Hazard/Home.html
Enjoy the song but don't expect the long term prospects for the US Economy to be anything to sing about.
Best wishes
Paul
Currency Today
It is very difficult to predict turning points in history. George Soros was correct in 1992 IN SAYING that sterling could not survive as a member of the European exchange mechanism, making a lot of money in the Process. Although he has not been as lucky with his Russian investments to say the least.
I like to look at the lessons of history and have been intrigued by the recent visit to china undertaken by the US treasury secretary Tim Geithner. I am prepared to stick my neck out amidst speculation about establishing a new world currency. China sorts out its economy by moving away from exporting and stimulating domestic demand while at the same time reforming its quasi governmental banking sector then the Chinese currency - the twenty first could become the next major reserve currency by the middle Of the twenty first century supplanting the dollar which has assumed this role since World War 2.
Tim Geithner gave a lecture at Peking University at which students openly questioned him about the safety of Chinese assets held in the US and laughed when he replied,
"Chinese assets are very safe." ref Financial Times 2/6/2009
Although many might argue that it is too early to say this could be seen as a turning point the economic facts confronting the US are not sanguine. At some point, currency markets and the individuals who operate within them will realise that something significant has changed in the way in which the US economy operates and after the proverbial penny drops their reaction will be swift and dramatic.
Currently the US and Chinese economies exist in a symbiotic relationship with US consumers buying cheap goods made in China (rather than the US as was once the case) and the Chinese investing the proceeds in US assets. According to the FT of 2/6/2009 94% of their foreign currency assets are held in US$ assets and only 6% are directly invested. Also, 70% of the $2,000 billion in foreign currency assets are held in US government bonds.
For the Chinese and other overseas governments the dollar is a global currency and US overnment bonds are perceived to be both safe and highly liquid. What the Chinese government and other investors are starting to realise is that the US economy is not the hegemon it once was and at some point they will decide to begin switching out of dollars and US bonds. This will not happen overnight as the sums involved are very large and as with trying to get a supertanker to change course any movements will initially be difficult to e.g. have also to decide where else they would like to invest as e.g. the euro has its own problems and gold is limited in supply.
Concerns about how long the US would remain a superpower were first raised by historian Paul Kennedy in his 1987 book "The Rise and Fall of the Great Powers" where he predicted that US military overstretch around the world and the cost of running its military machine would undermine the rest of the economy. Events did not turn out like that but more recently both Alan Greenspan in "The Age of Turbulence" and Niall Fergusson in "Colossus" have both expressed grave concerns about spiraling US public debt arising not just from defence commitments but more worryingly from growing healthcare and social security costs as the postwar baby boom generation starts to retire.
The Rise and Fall of the Great Powers: Economic Change and Military Conflict from 1500-2000 (Paperback) Paul M. Kennedy (Author)
The concern is that notwithstanding the pledge by the Obama administration to reduce the fiscal deficit to 3% of GDP (whereas in 2009 it is expected to reach nearly 13% of GDP - ref FT 3/6/2009) this will involve some very messy political decisions and the electoral cycle may force such decisions to be put off until another day.
The other problem is that the need to issue more public debt during an economic downturn could at some point precipitate a re-rating of US debt by the credit ratings agencies. Should this happen it would have a catastrophic effect on investor confidence. Bond yields would rise as their prices fell and the US government would have to pay higher interest rates in order to secure the necessary funding. The other danger is that as more debt is issued the cost of paying the interest on that debt can rise exponentially. These concerns have been raised by the US bond fund manager PIMCO and I attach a link to the recent Investment Outlook written by Bill Gross.
Staying Rich in the New Normal
Large scale debt issuance is also inflationary and for those of you who appreciate country music May I take this opportunity to draw your attention to a new song by Merle Hazard with the lyrics,
'Inflation or deflation,
Tell me if you can,
Will we be Zimbabwe or will be Japan"
http://www.merlehazard.com/Merle_Hazard/Home.html
Enjoy the song but don't expect the long term prospects for the US Economy to be anything to sing about.
Best wishes
Paul
Currency Today
Thursday, 14 May 2009
Sterling falls after Bank of England Quarterly Inflation report
Thursday 14/05/2009
• Dollar makes gains as major indexes post biggest loss since April 20th
• Risk aversion reappears on weak US retail sales report to rally the buck
• Sterling falls after Bank of England Quarterly Inflation report
• Industrial production in E/Zone slumps, weakening the euro
• Oil prices lower after a plunge in US stocks & weak US retail sales posted
US Dollar:
The dollar gained versus the euro and sterling yesterday after major equity markets had their biggest losses since April 20th and an unexpected drop in retail sales hurt consumer shares. Risk aversion jumped straight back into the market and spooked investors back into the safety zone of the yen and dollar. This pushed the greenback up by a cent on sterling to trade at $1.5122 and over a cent against the euro to trade around $1.3568. The worse than expected data will add a cautious note to trading and put a question mark on ‘green shoots’ hopes. While the dollar benefited from a decline in riskier rivals yesterday, there are persistent concerns over the greenback that have market analysts questioning how safe this traditional safe haven will continue to be. A report from China showing industrial production data wasn’t as robust as expected also helped bring risk sentiment back into the market, adding to the dollars more attractive position.
Data 13.30: PPI MoM & Initial Jobless Claims
Pound:
The pound started the day off yesterday fairly strong against the dollar and trading sideways against the euro, until the release of the Bank of England Quarterly inflation report at 10.30am. The central bank cut its forecasts for growth and raised its estimate for future inflation as it published its findings. The bank said the weaker profile for growth reflected a weaker than expected performance in Q1. In the bank report, inflation looks set to fall back below 2% later this year, putting a halt to expected interest rates rises anytime soon. This was also a reason
for the pound to be sold off. This saw the pound plummet against both the dollar and euro, with over a cent down for cable to hit $1.5148. Against the euro, we saw a small drop, but this was steamed to an extent after the eurozone released its own weak economic data, pushing GBP/EUR below 1.11.
No data.
Euro:
The euro was under pressure yesterday which kicked off with risk aversion coming back into the market, staring in Asia and spreading throughout Europe, with the dollar pulling back its losses on the single currency. The euro then released it s own bag of trouble in the form of the E/Zone Industrial Output report which showed that industrial production in the 16 countries that use the euro slumped to a fresh record low on the year in march, as output declined across all sectors and in major eurozone economies. EUR/USD fell from $1.36874 to $1.3585. The euro did see some gains on sterling, after the UK released its quarterly inflation report, which was a signal to
players to sell the pound. This saw EUR/GBP push through the 0.90level, but has given up some of those gains this morning.
Data 09.00: European Central Bank Monthly Report.
General:
• Oil prices are lower this morning after a plunge in US stocks and weak retails sales in the worlds biggest economy cut short a recent rally. Nymex crude fell 29 cents to $57.73 per barrel.
• Gold is retracing some early losses, yet is still down 90 cents to trade at $925.20 per troy ounce.
Currency Today
• Dollar makes gains as major indexes post biggest loss since April 20th
• Risk aversion reappears on weak US retail sales report to rally the buck
• Sterling falls after Bank of England Quarterly Inflation report
• Industrial production in E/Zone slumps, weakening the euro
• Oil prices lower after a plunge in US stocks & weak US retail sales posted
US Dollar:
The dollar gained versus the euro and sterling yesterday after major equity markets had their biggest losses since April 20th and an unexpected drop in retail sales hurt consumer shares. Risk aversion jumped straight back into the market and spooked investors back into the safety zone of the yen and dollar. This pushed the greenback up by a cent on sterling to trade at $1.5122 and over a cent against the euro to trade around $1.3568. The worse than expected data will add a cautious note to trading and put a question mark on ‘green shoots’ hopes. While the dollar benefited from a decline in riskier rivals yesterday, there are persistent concerns over the greenback that have market analysts questioning how safe this traditional safe haven will continue to be. A report from China showing industrial production data wasn’t as robust as expected also helped bring risk sentiment back into the market, adding to the dollars more attractive position.
Data 13.30: PPI MoM & Initial Jobless Claims
Pound:
The pound started the day off yesterday fairly strong against the dollar and trading sideways against the euro, until the release of the Bank of England Quarterly inflation report at 10.30am. The central bank cut its forecasts for growth and raised its estimate for future inflation as it published its findings. The bank said the weaker profile for growth reflected a weaker than expected performance in Q1. In the bank report, inflation looks set to fall back below 2% later this year, putting a halt to expected interest rates rises anytime soon. This was also a reason
for the pound to be sold off. This saw the pound plummet against both the dollar and euro, with over a cent down for cable to hit $1.5148. Against the euro, we saw a small drop, but this was steamed to an extent after the eurozone released its own weak economic data, pushing GBP/EUR below 1.11.
No data.
Euro:
The euro was under pressure yesterday which kicked off with risk aversion coming back into the market, staring in Asia and spreading throughout Europe, with the dollar pulling back its losses on the single currency. The euro then released it s own bag of trouble in the form of the E/Zone Industrial Output report which showed that industrial production in the 16 countries that use the euro slumped to a fresh record low on the year in march, as output declined across all sectors and in major eurozone economies. EUR/USD fell from $1.36874 to $1.3585. The euro did see some gains on sterling, after the UK released its quarterly inflation report, which was a signal to
players to sell the pound. This saw EUR/GBP push through the 0.90level, but has given up some of those gains this morning.
Data 09.00: European Central Bank Monthly Report.
General:
• Oil prices are lower this morning after a plunge in US stocks and weak retails sales in the worlds biggest economy cut short a recent rally. Nymex crude fell 29 cents to $57.73 per barrel.
• Gold is retracing some early losses, yet is still down 90 cents to trade at $925.20 per troy ounce.
Currency Today
Thursday, 7 May 2009
Bank of England left rates unchanged at 0.5%
The Bank of England left rates unchanged at 0.5% as expected today, but did add there was to be another £50bn pumped into the economy. This initially seems to have reduced the pounds position against the dollar and euro, but sterling is still managing to hold onto gains made earlier this week.
Given rising evidence that the worst of the U.K. recession may be over and given the ease with which the pound broke back over key resistance at $1.50, sterling back up towards $1.55 looks like a real possibility along with the 1.15 mark against a weaker Euro. The recent data releases are perceived as indication that the U.K. economy is no longer in meltdown mode but 'just' facing a nasty but more normal recession. Of course, downside risks for the pound remain. Not all the U.K. economic news is likely to be positive; a rise in global risk aversion could still take its toll and concerns over how the U.K. will fund its public sector deficit will continue to pose a threat.
Let's hope the Euro rate continues to improve, I have to say my recent trip to Pons in France over the bank holiday was noticeably more expensive at 1.09 (on my travel money) but the seafood, booze, sunshine and laughter certainly made up for it!
Currency Today
Given rising evidence that the worst of the U.K. recession may be over and given the ease with which the pound broke back over key resistance at $1.50, sterling back up towards $1.55 looks like a real possibility along with the 1.15 mark against a weaker Euro. The recent data releases are perceived as indication that the U.K. economy is no longer in meltdown mode but 'just' facing a nasty but more normal recession. Of course, downside risks for the pound remain. Not all the U.K. economic news is likely to be positive; a rise in global risk aversion could still take its toll and concerns over how the U.K. will fund its public sector deficit will continue to pose a threat.
Let's hope the Euro rate continues to improve, I have to say my recent trip to Pons in France over the bank holiday was noticeably more expensive at 1.09 (on my travel money) but the seafood, booze, sunshine and laughter certainly made up for it!
Currency Today
Monday, 20 April 2009
The Uk Pound comes under pressure from possible budget statements
The dollar is trading much higher today as risk aversion (investors avoiding risk) proves the dominant theme in currency markets in advance of this week's U.S. bank stress tests update.
Stocks, a key indicator of risk sensitivity in global markets, are on the retreat, with European indexes lower and U.S. stock futures also in negative territory. U.S. stocks are off...on the index futures, and that's having all the normal knock-on effects across the other currencies," said Adam Cole, chief currency strategist at RBC Capital Markets in London.
Over the weekend, the Obama administration appeared to be taking a more cautious tone, with the president suggesting that further government support may be needed as a result of the stress tests on the U.S. banking community. That encouraged investors to again shy away from high-risk asset markets with most equities making minimal gains and the dollar and the Japanese strengthening.
The U.K. pound has come under pressure by risks associated with this Wednesday's budget statement. The euro is also on the retreat after European Central Bank President Jean-Claude Trichet's suggestion the bank will cut rates by 25 basis points as well as apply nonstandard monetary easing at its next policy meeting in May. This has helped moved the USD strengthen against the Euro but has seen the opposite happen with the pound against the Euro now trading at 1.1254, over one cent down from the 1.1372 recent high seen on Friday.
According to the Guardian on Friday Trade minister Mervyn Davies said today he is not worried about the pound declining in value, saying that a weak currency will help drive the British economy out of recession. The article also mentioned that The pound's decline reflects the economy's vulnerability during the global financial crisis and economic downturn because of its heavy reliance on financial services. This has clearly been reflected in the pound’s weakness against the Euro since news of Northern Rock was released in 2007.
See the article on the link below:
http://www.guardian.co.uk/business/2009/apr/17/pound-mervyn-davies-recession
I also feel that sterling and the UK economy in the same way will see a fast recovery in employment and growth when the global and US economy in particular start to “turn a corner” for the better.
Talking about “turning a corner” my work 5 a side team got our first win last week (9-4) perhaps aided by my shouting of “we are winners” (this one got lots of laughs!) and “keep up the pressure” as I defended like my life was on the line and scored a couple of goals. Bring on Wednesday evening…
Toby Fischer
Currency Today
Stocks, a key indicator of risk sensitivity in global markets, are on the retreat, with European indexes lower and U.S. stock futures also in negative territory. U.S. stocks are off...on the index futures, and that's having all the normal knock-on effects across the other currencies," said Adam Cole, chief currency strategist at RBC Capital Markets in London.
Over the weekend, the Obama administration appeared to be taking a more cautious tone, with the president suggesting that further government support may be needed as a result of the stress tests on the U.S. banking community. That encouraged investors to again shy away from high-risk asset markets with most equities making minimal gains and the dollar and the Japanese strengthening.
The U.K. pound has come under pressure by risks associated with this Wednesday's budget statement. The euro is also on the retreat after European Central Bank President Jean-Claude Trichet's suggestion the bank will cut rates by 25 basis points as well as apply nonstandard monetary easing at its next policy meeting in May. This has helped moved the USD strengthen against the Euro but has seen the opposite happen with the pound against the Euro now trading at 1.1254, over one cent down from the 1.1372 recent high seen on Friday.
According to the Guardian on Friday Trade minister Mervyn Davies said today he is not worried about the pound declining in value, saying that a weak currency will help drive the British economy out of recession. The article also mentioned that The pound's decline reflects the economy's vulnerability during the global financial crisis and economic downturn because of its heavy reliance on financial services. This has clearly been reflected in the pound’s weakness against the Euro since news of Northern Rock was released in 2007.
See the article on the link below:
http://www.guardian.co.uk/business/2009/apr/17/pound-mervyn-davies-recession
I also feel that sterling and the UK economy in the same way will see a fast recovery in employment and growth when the global and US economy in particular start to “turn a corner” for the better.
Talking about “turning a corner” my work 5 a side team got our first win last week (9-4) perhaps aided by my shouting of “we are winners” (this one got lots of laughs!) and “keep up the pressure” as I defended like my life was on the line and scored a couple of goals. Bring on Wednesday evening…
Toby Fischer
Currency Today
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