Currency Market Update 12/10/10

[PhilBen]

With U.S. markets closed for Columbus Day, thin trading volumes saw traders betting on the Dollar having been oversold recently and pushed the greenback higher against the Euro and the Yen. Against the Euro the 1.40 key resistance level held and according to strategists at the GfK in New York “the markets appears ready to accept any excuse to trade below this level”. Actual levels of Dollar short bets have risen to the highest level since 2008, however. This contradiction suggests that fundamentals may not be as significant as investor sentiment.

Overnight releases in the U.K. include the RICS house index. The index fell from -32 to -36, the sharpest fall since May 2009. A sudden rush from homeowners to sell before the effect of Government Spending cuts is felt saw the supply of new properties increase. This morning German CPI figures confirmed the preliminary results with Sep m/m CPI coming in as expected at -0.1% and y/y figures at 1.3%. Reaction to this release has seen a slight weakening of the Euro.
Later today the minutes from the Federal Reserve’s September meeting will be published. This along with speeches presented by key policy makers this week, including Ben Bernanke, could shed some light on the Fed’s next move with regard to quantitative easing. Speculation is rife that the Fed is poised to implement some additional easing. U.K. CPI figures are expected this morning whilst in the United States data releases are limited to Chain store sales and U.S. Redbook.


Live IB rates at 11.35 am UK
GBP – EURO 1.146
GBP - USD 1.583
GBP- AUD 1.616
EURO - USD 1.38

 

[PhilBen]

Comments from MPC member David Miles and lacklustre CPI figures saw the Pound under pressure yesterday. Miles, speaking in Dublin appeared to show some support for the need to further quantitative easing, citing fears of a premature slowdown in growth. Whilst his comments were measured and indeed he also expressed a concern over inflationary pressure in the short term, his comments did provide the market with the impetus to sell the Pound which fell over 1% against the Euro

The U.S. Dollar gave up brief gains as the markets began to digest the release of the minutes from the latest meeting of the Federal Reserve on September 21. The minutes revealed that “many“ officials thought it was time to implement a fresh round of quantitative easing citing unemployment levels and concerns over inflation. The suggestion is that further monetary stimulus could be implemented as soon as the next FOMC meeting in November. Any hopes of a larger Dollar correction now seem to be dashed as the greenback traded lower against the Euro but held its gains against Sterling.
Consumer confidence in the U.K fell to its lowest level in a year according to the latest Nationwide survey, The index fell 9 points to 53 in September whilst spending intentions fell 14 points to 85, the lowest level since November 2008. Sentiment had been boosted in August and these figures have been received with some surprise. Fears over the looming Government spending cuts and future employment prospects in the U.K are being held to blame.

This morning markets await UK unemployment figures which are forecasted to show little change from the previous month. Euro zone industrial production figures are also expected. Later today U.S. Mortgage figures plus import and export prices are to be published.


Live IB rates at 10.22 am UK
GBP – EURO 1.132
GBP - USD 1.584
GBP- AUD 1.60
EURO - USD 1.398

 

[ANOTHER REBEL]

How about some predictions about where the Pound will be at the end of December and end of March.

My betting is it will reach parity with the Euro at some point in next 6 months.

 

[PhilBen]

How about some predictions about where the Pound will be at the end of December and end of March.

My betting is it will reach parity with the Euro at some point in next 6 months.

Some are saying it will be ok, I think we could see below 1.10 again. I still think the UK economy is going to suffer more than it has. The Pound rose up to 1.20 too fast to keep on that level and now has dropped back.There is a big possibility of poor data from the UK other the next few months so below 1.10 is not out of the question

 

[ANOTHER REBEL]

I will need to exchange Euros to Sterling by end of March.

Hindsight is a wonderful thing, I should have done it last March when the Euro was worth 91p.

In the past always took the ruling rate when the funds received, this year I gambled, and am currently loosing out.

I know nothing about forward contacts etc.,

Is there some mechanism I could use to maximise the potential return, and minimise the risk of the Euro going into freefall in the next 6 months?

 

[PhilBen]

I will need to exchange Euros to Sterling by end of March.

Hindsight is a wonderful thing, I should have done it last March when the Euro was worth 91p.

In the past always took the ruling rate when the funds received, this year I gambled, and am currently loosing out.

I know nothing about forward contacts etc.,

Is there some mechanism I could use to maximise the potential return, and minimise the risk of the Euro going into freefall in the next 6 months?

It all depends on your attitude to risk. The ib rate is about 1.13 at the moment if you are looking at last week, that’s good if you are selling Euros compared to 1.20. Buying a forward will lock you in to that rate and protect you from the pound going stronger against the euro. If the Pound gets weaker you miss out. It's a gamble ! The difference between 1.20 and 1.13 is around 5k on a 100,000 euro, a lot of money. Lots of times people hold off thinking the rate will get better and loose out as sometimes a better rate don't come (that’s within their time scale)No one really knows where the rate will be until it happens. If you would not put 5k on a horse, then don't gamble with your money and look at a forward.


Phil

 

[PhilBen]

The Dollar continued its slide overnight hitting an eight month low against the Euro in early trade this morning. Continued speculation over the Feds intention to resume quantitative easing drove the greenback lower. Some analysts have now suggested that the Fed may well be manipulating short term interest rates lower by increasing the level of speculation over its next move.

Meanwhile the Euro continues to trade higher. Comments yesterday from Axel Weber the President of the Bundesbank and member of ECB governing council provided a boost to the Euro. His suggestion that the ECB should begin to wind down its asset purchase programme, and his view that the likelihood of recession in Europe is negligible, allowed the Euro to make and maintain gains on the Dollar and the Pound. The unexpected rise in Euro zone Industrial production in August, up to 7.9% seemed to support Webbers views although some analysts have suggested these production levels may be unsustainable.

The Pound has broken out of yesterdays ranges and has joined the Euro in making its highest gains against the Dollar in 8 months to trade around 1.4% higher .

There is no local data scheduled for release today. In the U.S. we await the initial jobless claims and PPI inflation data.

Live IB rates at 10.25 am UK
GBP – EURO 1.139
GBP - USD 1.605
GBP- AUD 1.609
EURO - USD 1.408

 

[PhilBen]

Focus continues to be on quantitative easing and as such the Dollar and Pound remain under pressure with their respective central banks both having signalled the possibility of further intervention. Whilst the markets await the decision from the Fed and the BoE, China has criticised the fiscal policies of the U.S. and Japans Finance Minister for questioning China's currency policy, the political uncertainty has created uncertainty in markets with the euro being the main benefactor of this volatility. The Dollar fell to its lowest level this year against a basket of currencies yesterday as opinions hardened over the Feds intention to ease monetary policy in order to stimulate the flagging U.S. economy.

Inflation figures released yesterday may force markets to pause for thought as U.S PPI data showed that both the monthly and yearly measurements had increased by more than expected. Inflation increased to 4.0% y/y versus the previous 3.1% which constitutes the fastest rise in inflation since September 2009. Since an unwanted consequence of quantitative easing may be higher inflation these figures provide an unwelcome backdrop to the coming Fed decision. U.S Initial Jobless claims showed weekly claims for unemployment rising to 462,000. The figures had little impact on the value of Dollar and markets continued to price in the potential for future adjustments to U.S. economic policy.

This morning we await the release of Euro zone inflation figures whilst this afternoon US CPI data, US retail sales and University of Michigan sentiment index are expected.

Live IB rates at 10.00 am UK
GBP – EURO 1.137
GBP - USD 1.604
GBP- AUD 1.611
EURO - USD 1.409

 

[PhilBen]

The Dollar remained under pressure for the majority of Friday’s trading session due to a combination of data pointing to economic weakness within the States and comments made by Fed Chairman Ben Bernanke.
CPI came out lower than expected at 1.1% y/y, analysts had forecast a slight rise in inflation while retail sales in the United States came out slightly higher at 0.6% for September but the combined figures did little to change the overall perspective on the Dollar. Fed Chairman Bernanke was the main driving force behind the Dollar’s weakness as he confirmed the central bank’s position was dovish and reinforced expectations of further monetary policy easing.
Breaking above 1.41 versus the Euro the greenback retraced sharply as the Euro rally ran out of steam. Profit-taking set in after traders pulled back on selling the Dollar, considering the current levels of the greenback as being too weak to be sustainable.

The Dollar’s trend higher continued through the weekend and extended slightly this morning after markets noted ECB president Trichet had called for greater fiscal reform in Europe over the weekend, which once again highlights the issue of sovereign debt in the Euro-zone.

There is no local or E.U. data scheduled for release today leaving the Pound at the mercy of EUR/USD movements although Sterling is unlikely to see any significant gains. In the U.S. markets await the release of TICS capital flows and Industrial output figures.

Live IB rates at 10.22 am UK
GBP – EURO 1.142
GBP - USD 1.586
GBP- AUD 1.610
EURO - USD 1.388

 

[PhilBen]

Initially taking the Dollar higher, the greenback’s rally ended yesterday as a lack of data and the return of quantitative easing expectations pushed speculators and investor into the Euro. The single currency weakened in early morning trade as markets assessed the implication of the United States delaying its currency report which is thought to name China as a currency manipulator and could thus risk destabilising global economic recovery, as well as continued profit-taking and investor pausing to reassess Bernanke’s comments.
As speculation is never far behind the Dollar and Pound again trended lower throughout the remainder of the day although gains were gradual and did not push either currency cross out of its ranges. U.S. data added pressure to the Dollar coming out lower than expected, TICS capital flows came in at $38.9bln in August versus the $63.7bln the previous month. Industrial output fell to -0.2% m/m, economists had expected an unchanged 0.2% for September. The weaker economic fundamentals point towards sustained weakness with the U.S. economy and strengthened the argument for further easing in November.

Strong corporate earnings in the U.S. has again given a limited boost to the Dollar this morning although the Pound remains to the downside and is expected to remain at subdued levels for some time with market still considering U.K. government spending cuts and Chancellor Osborne’s support of further stimulus measures as Sterling negative factors.

German ZEW economic sentiment and U.K. industrial orders data is scheduled for release today while in the U.S. housing starts numbers are expected. The Bank of Canada announces its interest rate decision this afternoon with no change to rates expected.


Live IB rates at 9.41 am UK
GBP – EURO 1.137
GBP - USD 1.584
GBP- AUD 1.602
EURO - USD 1.392

 

[PhilBen]

The Euro continues to strengthen against the Pound but only capped losses versus the Dollar after better than expected German ZEW figures yesterday. ZEW economic sentiment came out at -7.2, better than the consensus forecast while the current conditions index rose to 72.6 from 59.9 in October. Further weakness for the Pound came from a sharp decline in CBI industrial orders which fell to -28 from-17 in October. Sterling was spared further depreciation against the Euro by a surge in Dollar levels, comments from U.S. Treasury Secretary Geithner, events in China and stronger economic data pushing the Dollar higher across the board.

Geithner commented to markets that current levels for the Dollar were not devaluing the U.S. currency and China surprised market by raising interest rates 25 basis points, the first rate hike by the Chinese central bank in 3 years. Commodity prices fell with oil losing 2% of its value which added up to additional support for the dollar. Economic data in form of U.S. housing starts figures was the final supportive element for the greenback, housing starts rose 610K m/m in September from 598K previously.

Ranges have held overnight and the single currency continues to find support as German PPI data showed inflation rose to 3.9% y/y which some see as another sign that the ECB will not need to change their stance on monetary policy in the near future.
There is no further E.U. data out today but the main focus for markets will be the release of U.K. government spending figures, expectations are for net borrowing to fall slight although financing to the U.K. government is forecasted to have increased. In the U.S. only mortgage data is scheduled for release.


Live IB rates at 9.59 am UK
GBP – EURO 1.138
GBP - USD 1.573
GBP- AUD 1.607
EURO - USD 1.381

 

[PhilBen]

Sterling fell sharply across the board yesterday after the release of significantly worse than expected public spending figures and dovish minutes from the Bank of England. Public sector net borrowing in the U.K. rose to £15.607bln in September, economists had forecast a slight improvement to £14.2bln from £15.3bln. Financing to the government also rose in September to £20.736bln from £5.8bln the previous month.

The minutes from the Bank of England’s most recent MPC meeting indicated a 3-way (1-7-1) split vote, Andrew Sentance again calling for a 25 basis point rate hike while Adam Posen held firm in his position for more quantitative easing to be introduced. The remaining members saw no need for an immediate change but felt that further stimulus would be warranted in the new few months and expressed concern over the lagging British economy.
Initial losses were slowly reversed throughout the morning session as markets awaited comments for U.K. Chancellor George Osborne. Osborne did not significantly alter the governments’ planned public spending cuts from those proposed in June. He further pledged to seek the “maximum sustainable” revenue from the finance sector, suggesting the impact of proposed bank levies might be lessened slightly. The Pound strengthened on the back of these comments.

Weaker U.S. mortgage data and markets preparing for a dovish fed Beige Book report pulled the Dollar lower across the board. The beige book report indicated the U.S. economy continued to grow at a moderate pace but there were scant inflation pressures and jobs grow remained slow. The report does not alter the perception that the U.S. central bank will continue to consider further stimulus.

Overnight the Dollar has recovered as the U.S. Treasury Secretary Geithner said major currencies are “in alignment” and the U.S. was not trying to weaken the Dollar. Added to this, China’s Q3 GDP figures beat market forecasts to give further support to the greenback.

Sterling has slumped this morning across the board posting new lows versus the Euro after the BoE’s chief economist Spencer Dale was quoted as saying “uncertainty over inflation and the speed of the economic recovery means policymakers must alter their views as circumstances change”, his comments seem to imply support for further stimulus.
German PMI manufacturing came out higher than expected adding further support for the Euro, the manufacturing index rose to 56.1 in October. Markets await the release of E.U. PMI manufacturing later this morning. In the U.K. retail sales data is crucial as economists have forecasted an improvement in sales. This afternoon U.S. weekly jobless claims, the Philadelphia Fed report and leading economic indicators are scheduled for release.


Live IB rates at 11.32 am UK
GBP – EURO 1.124
GBP - USD 1.577
GBP- AUD 1.597
EURO - USD 1.402

 

[PhilBen]

The Euro performed well yesterday as positive German and EU PMI manufacturing data lifted the single currency across the board. The German PMI index rose to 56.1 from 55.1 in October while in Europe PMI increased to 54.1 from 53.7 for the same period. The Euro struggled to hold onto its gains despite the strong figures as markets are still viewing levels in EUR/USD above 1.40 as oversold and bought Dollars after each break higher.

Sterling fell sharply after the release of weaker than expected retail sales numbers. Retail sales in the United Kingdom rose only 0.5% y/y against an expected 1.0% rise and with upward revisions to the previous months release increased the disappointment and concern felt by the market. The data supported the views expressed by MPC member Adam Posen in the Bank of England minutes that additional stimulus was needed immediately and raised concern that spending cuts would further depress an already slowing economy.

The Dollar maintained ranges but received support once again from US Treasury Secretary Geithner, who for the second time this week commented on speculation that the United States was actively weakening the Dollar. Geithner said there was no U.S. policy to weaken the Dollar deliberately. Economic data from the States gave further support to the Dollar as the weekly employment figures improved and future expectation remained unchanged.

Overnight focus has shifted to the G20 meeting in South Korea this weekend and the value of global currencies is likely to be high on the agenda. The U.K. CBI warned early today against trade barriers being enforced against China.

German IFO business climate index rose to 107.6 in October, higher than expected which initially pushed the Euro higher but with the G20 now being the main focus and no further major economic data scheduled for release the impact has been limited. Canada sees the release of CPI inflation data and retail sales numbers this afternoon.

Live IB rates at 10.28 am UK
GBP – EURO 1.127
GBP - USD 1.568
GBP- AUD 1.601
EURO - USD 1.391

 

[PhilBen]

The weakness seen in the Dollar on Friday as markets prepared for the G20 meeting over the weekend has continued this morning. Risk appetite increased amid concerns easing over a currency war developing. The G20 communiqué released over the weekend provided what many view a simply a patch on the underlying issues and has not resolved tensions or the vastly differing opinions over who is responsible for the current global imbalances and will keep China and the United States a loggerheads with one another. The G20 members did agreed not to take part in competitive devaluations and also agreed a framework to contain large trade surpluses and deficits, although these lacked specific targets.

Traders are now moving their focus back to the Fed’s rate setting meeting on the 2nd November when it is expected that further quantitative easing measures are likely to be announced. The threat of added stimulus to the U.S. economy is considered to be the main driving force behind the Dollar’s recent weakness.

The Euro’s advances against the Dollar has pushed it to new 6 month highs versus the Pound, a lack of economic data today means Sterling is likely to once again take its cues from wider market movements as traders prepare for tomorrows U.K. Q3 GDP results. The CBI conference starting today has Prime Minister David Cameron speaking before business leaders and his comments are likely to be noted for any hint of what the future holds for the British economy. In Europe only E.U. industrial new orders are scheduled for release while in the U.S. existing home sales are expected.

Live IB rates at 10.28 am UK
GBP – EURO 1.121
GBP - USD 1.572
GBP- AUD 1.58
EURO - USD 1.402

 

[PhilBen]

Initially falling across the board, the Pound traded in line with movements in EUR/USD for the majority of yesterday’s trading session. Markets opened to the release of the G20 communiqué but with speculation on currency wars having been put to rest, focus for the Pound moved onto today’s U.K. Q3 GDP release. Traders priced in weaker growth figures and speculation over further quantitative easing measures by the Bank of England pulled the pound lower.
European industrial new orders data for the month of August came out significantly higher than expected but the data is a slightly lagging indicator so traders focus returned to technical levels and profit-taking that gave benefit to the dollar.
The U.S. Dollar closed higher yesterday and maintained its gradual upward trend overnight, Fed Chairman Ben Bernanke spoke at a conference on “Mortgages and the Future of housing finance” yesterday and his comments gave rise to positive Dollar sentiment before the release of expected existing home sales figures. Bernanke stated that regulators would be reviewing the policies and procedures of firms to determine if there are any “systematic weaknesses” that are leading to improper foreclosures. His comments eased concerns over the negative impact that foreclosures could have on the U.S. housing sector and the view seemed to be justified by the release of better U.S. existing home sales for September which rose more than expected to 4.53mln from 4.13mln in August.

German Gfk consumer confidence figures have weighed on the Euro slightly this morning remaining unchanged at 4.9 m/m, analysts had expected a rise in confidence. There is no further European data scheduled for today.
The main data event for sterling is the release of U.K. Q3 GDP preliminary figures, economist have forecast for a drop in quarterly growth to 0.4% from the 1.2% level in the second quarter. In the U.S. only consumer confidence data is expected to be released.

Live IB rates at 10.28 am UK
GBP – EURO 1.136
GBP - USD 1.583
GBP- AUD 1.602
EURO - USD 1.393

 

[PhilBen]

The pound and the dollar continue to recover against the euro as the expectation of imminent quantitative easing by the respective U.S. and U.K. central banks has decreased. Third quarter U.K. GDP figures surprised markets yesterday by beating consensus forecasts, quarterly GDP showed growth at 0.8%, the forecast was for growth to fall to 0.4% from the 1.2% Q2 growth results. Market expectation that stimulus could restart at the Bank of England’s November MPC meeting eased and while GDP figures are backward looking and the BoE could still introduce additional stimulus most believe the central bank will repackage any proposed action before implementing such measures.
An added boost to the pound also came from Standard & Poor’s, the rating agency revised its outlook for the U.K. from “negative” to “stable” and reaffirmed Britain’s triple-A sovereign debt rating.
Stronger housing data on Monday pushed the dollar higher and reduced expectation of quantitative easing by the Fed next week, the upward trend for the greenback continued yesterday supported not only by investor confidence but also consumer confidence, the confidence index rose 50.2 in October, above market expectation.

The euro is trading slightly higher this morning as German bank earnings results released this morning were seen as positive and drove equity markets in Europe higher. Gains have been limited as sentiment is still moving away from the single currency and with no further economic data on the calendar for today means the euro will follow developments in the U.S. today.
There is no U.K. scheduled for release today and in the U.S. mortgage and new home sales data are expected as well as durable goods orders.

Live IB rates at 9.25 am UK
GBP – EURO 1.144
GBP - USD 1.58
GBP- AUD 1.62
EURO - USD 1.38

 

[PhilBen]

The Dollar continued to advance yesterday bolstered by the reduced expectation of further quantitative easing from the Federal Reserve Bank. Economic data releases came out higher than expected with U.S. durable goods orders rising to 3.3% m/m in September and new home sales increasing to 307K from 288K the previous month.
The Pound and the Euro spent the majority of the day trading along with Dollar performance levels as markets events in the United Kingdom and Europe were seen as moderate. In the U.K. deputy BoE governor Bean commented to markets that the Bank of England did not need to rush into hiking interest rates, the tone of his comments seem to suggest that the central bank will likely hold fast on any changes to monetary policy but also left the door open for further stimulus to be introduced.

In Europe bank earnings pushed equity market higher and German inflation figures came out to the upside, in line with expectation. The moderate increase in inflation does not alter the view that the ECB will hold on policy and gave only limited support to the single currency.

Overnight the Bank of Japan announced its interest rates decision keeping rates on hold at near zero levels and suggesting no change to previous policy expectations, the Japanese yen appreciated across the board recovering the previous days losses.

The Pound is trading lower this morning after the overnight release of weaker than expected housing data, the Nationwide house price index fell to -0.7% m/m from 0.1% in September. Analysts now await the release of E.U. and U.S. economic data later today. German unemployment and European economic sentiment data is expected this morning while in the U.S. weekly jobless claims are scheduled for release.


Live IB rates at 11.13 am UK
GBP – EURO 1.144
GBP - USD 1.583
GBP- AUD 1.621
EURO - USD 1.383

 

[PhilBen]

The Dollar fell across the board yesterday after spending the week recovering as traders bought the Dollar due to the expectation that the Fed will take a far less aggressive stance on additional quantitative easing next week. News that the Fed had sent out a survey asking primary Treasury dealers of their expectations of the size and impact of further asset purchases weighed on the greenback and weekly jobless claims despite being stronger than expected had little impact on Dollar trade.

The reversal in sentiment and unchanged German unemployment levels left the Euro trading lower across the board, European economic sentiment did show some improvement but did little to offset weakness in the single currency.
The Pound made gains on movements in EUR/USD but enjoyed some independent strength after better than expected CBI distributive trades figures. The data boosted expectations that the Bank of England will continue to hold steady on added stimulus at the next MPC meeting.

Sterling’s upward trend continued overnight with GfK consumer confidence adding to the positive data trend, the consumer confidence index rose to -19 against an expected fall of -22 in October. Movements in the Euro have remained to the downside with German retail sales falling in September and little European data still to be released today. The main market focus will be on the Dollar with U.S. Q3 GDP advance expected later today. BoE consumer credit and E.U. unemployment figures are scheduled for release this morning. Other U.S. data expected this afternoon is the Chicago PMI and the final revisions to the University of Michigan sentiment index.

Live IB rates at 11.09 am UK
GBP – EURO 1.15
GBP - USD 1.59
GBP- AUD 1.638
EURO - USD 1.381

 

[PhilBen]

Unchanged headline U.S. Q3 GDP figures and weaker GDP component numbers pulled the Dollar lower as concerns over a second round of quantitative easing by the Fed heightened on Friday. Growth in the United States rose to 2.0% in the third quarter, up from 1.7% in the previous quarter, in line with expectations. The Inflation component of the GDP index showed price pressures easing and raised speculation that the FOMC would introduce additional liquidity this week to support the economy and stave off possible deflation.
The Dollar’s trend lower continues this morning as a boost in Chinese PMI manufacturing pushed Asian equity markets higher and saw the Japanese Yen appreciate across the board. Speculation has increased that the Bank of Japan would intervene in the markets to avoid further appreciation of its currency although the impact on the Dollar has thus far been negligible.

The primary focus for economists will be this week’s Federal Reserve Bank, Bank of England and European Central Bank meetings, only the Fed and the BoE are potentially expected to make any changes to policy and the Dollar and the Pound are thus likely to struggle as markets attempt to find clarity on future economic conditions.

There is no European data scheduled for release today, in the U.K. PMI manufacturing data is expected and in the U.S. personal consumption and ISM manufacturing figures are awaited.


Live IB rates at 9.18 am UK
GBP – EURO 1.146
GBP - USD 1.604
GBP- AUD 1.619
EURO - USD 1.398

 

[PhilBen]

The Dollar traded lower yesterday as market squared positions ahead of the U.S. mid-term elections and the FOMC meeting later this week. Pre-election polls have suggested that the Democrats would lose the House of Representatives, a situation that would make introducing economic reform more difficult and is seen as a potential set back to recovery by analysts. Economic data in early trade boosted the expectation of further quantitative easing by the Fed and placed further pressure on the greenback, personal consumption rose in October while income dropped. The release of ISM manufacturing and construction spending figures both beat the markets consensus forecasts and pushed the Dollar higher, in context of quantitative easing the data reduced the expectation of added liquidity. Sterling pushed higher across the board until the release of the afternoon U.S. data figures. U.K. PMI manufacturing surprised to the upside coming out at 54.9 against the previous release 53.4 the previous month.

The Euro remained range bound after initially losing ground against the Dollar and the Pound. Traders are today supporting the Euro as they anticipate U.S. election results and pulling out of the Dollar. The Reserve Bank of Australia surprised markets by raising interest rates 25 basis points to 4.75% overnight and pushed the Australian dollar higher across the board, the central bank cited concerns over increasing demand and a lack of spare capacity in the economy as reasons for the monetary tightening.

There is no U.K. or U.S. data scheduled for release today, in Europe economists await the release of German and E.U. PMI manufacturing data. Traders in the United States will certainly be keeping election results in mind throughout the day


Live IB rates at 9.36 am UK
GBP – EURO 1.147
GBP - USD 1.605
GBP- AUD 1.604
EURO - USD 1.398

 

[PhilBen]

The Euro gained across the board yesterday after better than expected German and European data pushed the single currency higher, German and E.U. PMI manufacturing figures both came out better than expected at 56.6 and 54.6 respectively for October. The Pound struggled as PMI construction data for October fell more than expected to 51.6 from 53.8 in September, forecasts were for a slight drop to 53 m/m.

US election expectations and further anticipation of a possible increase in quantitative easing by the Federal Reserve Bank today kept the Dollar trading to the downside and is keeping the greenback pinned down this morning. The Republican Party has taken control of the House of Representatives and made gains in the Senate which has left market uncertain as the ‘balance’ in congress could result in either a deadlocked government or a greater push on reform. Analysts are sitting back and waiting for further clarity on political intentions which is keeping the Dollar trading lower.

U.S. data will be the main focus for today with the ADP employment report and ISM Non-manufacturing figures being key releases. Both indicators are expected to show improvement but any weakness would strengthen the argument for more quantitative easing by the Fed tonight and would weigh on the Dollar.

In the U.K. PMI services data is expected which given the impact of the weaker PMI construction figures yesterday will be closely watched to determine if further stimulus by the Bank of England will become more or less likely. There is no European data scheduled for today to affect Euro trade.

Live IB rates at 10.18 am UK
GBP – EURO 1.148
GBP - USD 1.613
GBP- AUD 1.613
EURO - USD 1.405

 

[PhilBen]

The dollar has fallen to its lowest level this year after the Federal Reserve Bank boosted its quantitative easing program by $600bln on Wednesday.
Sterling made gains across the board ahead of the highly anticipated Bank of England monetary policy meeting, Halifax house price data came out better than expected at 1.8% m/m with downward revisions to previous numbers adding to the positive interpretation of the numbers. The Bank of England kept rates unchanged at 0.50% as expected and more importantly for the pound made no changes to its £200bln asset purchase scheme. MPC members indicated they wanted evidence of a sharper economic slowdown before considering any quantitative easing changes and cited high inflation as a factor of particular concern.
European data ahead of the ECB rate decision added to the upward momentum the euro enjoyed following the Fed decision. German PMI services and European PPI data came out largely in line with expectations while E.U. PMI services figures rose slightly.
The European Central Bank kept rates unchanged at 1.0% as expected and Trichet’s statements had little effect on the euro as the ECB President kept the central banks stance on monetary policy virtually unchanged. Trichet stated that the momentum in the underlying economic recovery remained positive but uncertainty about the outlook for Europe still prevailed. Regarding dollar weakness Trichet expressed no concern and indicated he is confident the U.S. government continues to support a strong dollar policy.

U.K. PPI inflation figures are to be released this morning along with E.U. retail sales and German industrial orders. The main economic event will be the release of Non-farm payrolls; the expectation is for an improvement in employment figures.


Live IB rates at 9.47 am UK
GBP – EURO 1.144
GBP - USD 1.621
GBP- AUD 1.60
EURO - USD 1.41

 

[PhilBen]

Markets appear to be taking stock today after a run of profit across a number of indices. The Feds decision to inject $600bn of fresh capital has also led some traders to pause for thought. With economic leaders from around the world meeting at the G20 summit on Thursday providing the highlight of a much less dramatic week in terms of economic data.

Friday saw the release of U.S non Farm Payrolls data . Non-farm indicated 151,000 jobs were created in the month of October while figures for September were revised upwards as well. The stronger employment figures gave rise to speculation that the Fed may not utilise the full $600bln in stimulus announced earlier in the week. This news has resulted in a rally for Dollar which continues to strengthen with the greenback again advancing on the Euro gaining 0.5% so far this morning.

The confirmation of intention from the Fed has allowed investors to turn their attention back to factors which had perhaps been overshadowed in the run up to the decision with Eurozone sovereign debt problems back in focus. 10 year Irish bond yields hit record highs on Friday sparking some profit taking and talk of a retracement on the Euro although traders may be cautious of taking the Dollar too high ahead of the G20 summit.

This morning figures released showed that German exports grew twice as fast as expected in September at €15.6bln over an expected 11.9bln. These figures bode well for Q3 growth and have provided some support for the Euro.

In Europe today we have the Sentix index of investor sentiment and German Industrial output for September. There is no significant U.S data scheduled for release today.


Live IB rates at 9.19 am UK
GBP – EURO 1.158
GBP - USD 1.612
GBP- AUD 1.595
EURO - USD 1.391

 

[PhilBen]

Yesterday saw the Euro fall against the Pound and the Dollar as concerns over the economic health of the periphery members of the European Union came to the fore. Debt concerns for Ireland, Greece and Portugal pushed yield spreads higher against German debt. As mentioned yesterday the market appears to have been fixated on quantitative easing for the past few weeks. Now that this is no longer in question, focus is very much back on the Euro zones periphery debt market. There are expectations that this could well be the driving force for the value of the Euro in coming days.
The Euro was also weakened by data releases than revealed a larger than expected drop in September’s German industrial production. Output fell by 0.8% when the markets had been expected a rise of 0.5%. By the end of the European trading day the Euro was 0.8% down against the Dollar and 0.5% down against the Pound.
Meanwhile the Dollar continued to find support largely buoyed by the better than expected Jobs data we reported on yesterday. Analysts also confirmed that the lack of speculation over the result of the midterm elections and also the size of the Feds Quantitative easing program have contributed to the recent rise in the value of the Greenback. The Dollar rose 0.3% against the Pound yesterday and 0.4% against the Swiss franc.

UK industrial production data for September is released today. There is no other significant European data. Later in the U.S, the October NFIB Small Business Optimism survey and September wholesale inventories are released.


Live IB rates at 9.51 am UK
GBP – EURO 1.1597
GBP - USD 1.611
GBP- AUD 1.59
EURO - USD 1.389

 

[PhilBen]

Sterling has had a bumpy ride over the past 24 hours reaching 6 weeks highs against the Euro whilst losing 2 cents against the Dollar, touching a 2 week low.

Peripheral debt concerns, as we predicted yesterday, have dogged the single currency with Irish/ German debt yield spreads moving to their widest ever level. This allowed the Pound to reach levels against the Euro not seen since late September.

U.K data was positive yesterday. The release of September output levels showed British Industrial growth grew broadly in line with forecast despite the manufacturing component being slightly weaker than expected. U.K trade data was also well received. The trade gap narrowed but not by as much as expected.

Concerns over the publication of the Bank of England’s Inflation report took hold in late trading. Traders appeared to be cutting their exposure as the pound fell 2 cents against the Dollar. The move was also exacerbated by rising U.S treasury yields prompting further moves into the Greenback.

The publication of the Bank of England’s Quarterly Inflation Report takes centre stage this morning. This represents the first opportunity for traders to assess the MPC’s austerity measures in detail. Market will be keen to see if this pushes the rate-setting MPC any further to considering following the US Fed down the path of additional asset purchases.

There is no other significant European data scheduled for release today whilst in the U.S we look forward to the release of key Mortgage data, Export prices, Trade data and the latest Jobless numbers.


Live IB rates at 9.51 am UK
GBP – EURO 1.158
GBP - USD 1.60
GBP- AUD 1.588
EURO - USD 1.381

 

[avalon]

Will the result of the administrators investigation into the demise ofCrown Currency Exchange affect the currency market?

 

[PhilBen]

Will the result of the administrators investigation into the demise ofCrown Currency Exchange affect the currency market?

It should not as Crown was basicly a Holiday Money Company, this is not the same as a Money Transmitter.

 

[PhilBen]

Risk aversion remains in sharp focus today as the G20 made little progress in defusing the international currency tensions whilst Ireland keeps pressure on the Euro.

The G20 meeting in Seoul merely reaffirmed that the decisions taken at the previous meeting should be enacted, in terms of currency imbalances little progress was made with many emerging market members expressing great concern over the Federal Reserve Bank’s quantitative easing measures and the impact this would have on the strength on the Dollar. Market disappointment at the lack of resolve has kept markets favouring risk aversion and thus is supporting the Dollar at this morning’s open.

The rumours mills regarding Ireland’s potential bail out are still going strong and the single currency is trading a bit more firmly as speculation of an imminent bail out have increased. The Irish government has denied recent reports but confirmed it was still in talks, keeping speculation of funding very much alive.

In contrast to the E.U. and U.S. where central bank action is more certain, the Pound is trading in nervous ranges as uncertainty over future action by the Bank of England prevails. Inflation remains a concern for the BoE and from a broader perspective government spending and spending cuts are still of concern to economic recovery.

There is no local data scheduled for today and in Europe trade balance figures are expected. U.S. Retail sales figures for October are the only significant piece of data of the calendar for today.

Live IB rates at 10.00 am UK
GBP – EURO 1.177
GBP - USD 1.627
GBP- AUD 1.588
EURO - USD 1.362

 

[PhilBen]

Risk aversion held fast yesterday despite strong economic fundamentals from Europe and the United States. Higher than expected trade surplus figures for the E.U. initially gave support to the Euro and showed the euro-zone as a whole remained economically fairly robust but concerns over conditions in Ireland led the single currency to give up earlier gains.

The overall investor trend remained in favour of the Dollar although gains were slow and largely range-bound. Retail sales data from the U.S. showed a monthly rise in sales of 1.2% in October, higher than the 0.7% forecasted. In addition U.S. business inventories also came out slightly higher than expected but upward revisions to previous numbers kept Dollar losses limited and quickly returned the greenback to its upward trend. The Fed supported this trend overnight after voicing a dovish tone in its defence of the monetary easing policy announced recently.

Technical triggers in EUR/USD has boosted the single currency at the European market open but trade remains nervous, Ireland’s European minister commented to markets that the Irish government has not applied for a bail out to the EU or IMF and that the liquidity issues were in the banking sector rather than a sovereign problem.

Markets await the release of U.K. CPI inflation figures which many hope will give some indication as to the intent of the Bank of England, forecast is for a slight rise in m/m price pressure. German ZEW current conditions and E.U. inflation figures are expected later this morning. In the U.S. PPI inflation, TICS capital flows and industrial output data is scheduled for release.

Live IB rates at 10.37 am UK
GBP – EURO 1.178
GBP - USD 1.603
GBP- AUD 1.633
EURO - USD 1.36

 

[PhilBen]

The dollar continues to benefit from risk aversion as fears over a bailout for Ireland by the EU/IMF intensified and concern over contagion for others areas in Europe increased.
The pound maintained some strength after the release of higher than expected consumer inflation figures, CPI y/y for October rose to 3.2% from 3.1% the previous month. The higher inflation data reduced the expectation of further quantitative easing by the Bank of England and Mervyn King’s letter to the Chancellor indicated inflation would remain above target well into 2011 and that the monetary policy committee felt the spare capacity in the economy would reduced inflation in the medium term.
E.U. inflation and German ZEW economic sentiment data gave the euro a short reprieve yesterday as both indicators rose above expectation. Economic releases from the United States had little overall impact on the movement of the dollar with data being mostly flat and focus returning to risk aversion for the afternoon trading session.
The driving forces between the pound and the euro split slightly; Euro movements were dictated by concerns of an Irish bailout and possible contagion after report surfaced that Greece may miss its fiscal targets. For sterling BoE Governor King commented that despite the slightly higher inflation figures the door remained wide open for an introduction of additional liquidity injections should they be deemed necessary. Both events pushed the respectively currencies lower versus the dollar although ranges in GBP/EUR remained unchanged.
There is no European data for today, in the U.K unemployment figures are expected and in the U.S. mortgage changes, CPI inflation and housing starts number are scheduled for release.


Live IB rates at 10.35 am UK
GBP – EURO 1.177
GBP - USD 1.592
GBP- AUD 1.627
EURO - USD 1.35

 

[PhilBen]

Employment data for the United Kingdom was slightly stronger and the Bank of England minutes offered few surprises yesterday which pushed sterling higher across the board. The ILO unemployment report showed the rate of unemployment remain unchanged at 7.7% while the claimant count change showed a reduction in the number of jobless claims for October. The Bank of England minutes showed a 3-way split vote, as expected. The majority of the MPC voted for no change with Sentance again voting for a 25 basis point rate hike and Posen favouring a further £50bln quantitative easing increase. Expectations on inflation remained largely unchanged but a slight shift in tone by the BoE gave the pound a boost. The minutes indicated the MPC stood ready to take action in either direction depending on the balance of risks which solidifies the central bank’s wait-and-see stance and reinforces the view that further liquidity would not be introduced this year.
Hopes of a resolution to the Ireland debt problem and weaker U.S. data lifted the euro in afternoon trade yesterday. ECB member Mersch commented in the market that Ireland’s problem was one of an overstretched banking sector and that it was ‘absurd’ to assume Spain would soon become insolvent.
U.S. CPI inflation dropped to 1.2% y/y for October while housing start numbers fell more than expected to 519K units. The data supports the Federal Reserve Bank’s quantitative easing decision.
The pound is trading lower this morning as trader take a cautious position ahead of today’s all important government spending figures. Economists are expecting an improvement but after last month’s surprise increases in spending traders are not taking any risks. Retail sales data for the U.K. will also be released where an improvement in sales is expected. There is no major E.U. or U.S. data scheduled for release today.


Live IB rates at 9.23 am UK
GBP – EURO 1.17
GBP - USD 1.596
GBP- AUD 1.613
EURO - USD 1.363