Currency Market News on US Confidence, the Greece debacle and Ben Bernanke
24, February 2010
Yesterday’s US consumer confidence data came in weaker than expected and highlights the delicate recovery phase for the US economy. This also backs up recent dovish comments from the Fed asserting that interest rates will need to remain low for a prolonged period and that liquidity withdrawal may not be a foregone conclusion.
The data helped to spook the markets and strengthened the natural safe havens of the JPY and USD. The Yen was also lifted on good export data pushing GBP/YEN back below 140.00 and USD/YEN down to 90.00. At the moment for recovery we have an east and west divide with robust recovery coming from China, Malaysia, Hong Kong contrasting the jitters in Europe, the UK and the US. The tide has shifted.
The Greece debacle is still ongoing and Fitch downgraded the 4 largest banks to BBB with a negative outlook to boot. The situation was not helped by a German Lawmaker of the ruling conservative party commenting that Germany must ensure that it does not pay for Greece as it could trigger the demand for more aid. In addition the Czech finance minister said that the Greek pledge to cut the deficit to 3% in 3 years is “nonsense” in his view. No beating around the bush there!
Sterling remains subdued after yesterdays dovish sentiments from the MPC. This was again reiterated in case the markets did not get the message by Mr Posen today who opined that we will keep the door open for more QE- “if we have to we will”. Don’t expect any big moves for sterling today. The tone of the MPC, the deficit and the election is leaving Sterling stuck in the mud at the moment with more rain forecast.
Today we have Ben Bernanke’s testimony to congress on monetary policy. It will be interesting to judge his tone going forward and his feedback as regards the hike in the discount rate.
Report by Phil McHugh
Currency Market Updates by Tom Nadir
Currencies Direct is a leading commercial foreign exchange company with offices in the UK, Australia and Spain and has offices across 5 continents. Currencies Direct’s head office and global trading centre is based in the City of London.
The contents of this report are for information purposes only.
BlogCatalog – Finance
Currency Market News on UK and US Interest Rates and The Beleaguered Euro
18, February 2010
Yesterday the markets digested the minutes of the February interest rate meetings for both the UK and the US. Firstly looking at the UK the vote was a unanimous 9-0 to keep interest rates on hold and also to hold Quantitative Easing at £200 billion.
The feedback from the MPC was ambiguous in the sense that the decision was unanimous and yet the comments were that it was a “finely balanced” decision to keep QE on hold. The unanimous decision gave sterling a boost which was then tempered by weaker than expected employment numbers. Going forward this does not change the sentiment for sterling which will struggle to appreciate until the outlook for the UK warrants a more hawkish approach from the MPC.
Over to the US and the FOMC upgraded their forecasts for the US economy reflecting a more bullish tone from the Fed. They also discussed trying to shrink their reserves over time although no time frame was announced to do this. The positive tone from the Fed with improved economic sentiment in the US coupled with loitering fear in the markets helped to push the USD higher. Japan as expected voted to keep their key overnight rate at 0.1% – no real surprises in the accompanying statement.
The main focus for the currency markets still surrounds the beleaguered euro which is threatening to fall below 1.35 against the USD risking further selling pressure for the single currency. Today data from the UK’s public finances was not pretty and is a further reminder that the UK needs to get its act together…sterling fell on the news unsurprisingly.
Report by Phil McHugh
Currency Market Updates by Tom Nadir
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Currency Market News on UK Jobless Figures, EU Anger at Greece and Market Movement
17, February 2010
Jobless claims were up 23,500 against the expectation of a fall of 10,000 so not good feedback for the employment sector. This data for January was disappointing but not wholly unexpected and simply reinforces the fact that the employment sector remains very sluggish.
Although we may have officially exited the recession on paper the reality is that we still have a long a painful road ahead.
The official unemployment rate remains at 7.8%. In addition to the employment data we also had the minutes from the February interest rate meeting for the UK. The Bank Of England minutes came in 9-0 as expected to keep interest rates and Quantitive Easing (QE) on hold. Although all members voted to leave the size of the asset purchase programme unchanged,it was noted that some members felt the arguments for a further increase were “finely balanced”. This underlies the uncertainty within the MPC on the future impact of the £200 billion already introduced and therefore the MPC will not close the door on further QE if required.
Sterling is likely to remain subdued as the BoE feel that inflation will fall further in 2010 and further expansion of QE is a weapon that they will use again if necessary.
Back to Greece and yesterday it was agreed to give the government time to co-ordinate their future policy on their budget. However there was a clear tone of anger from the EU for the shocking handling of their finances to date and they have until the end of March to come up with some answers. The EU also stripped Greece of its voting rights at next months meeting in an attempt to demonstrate their anger towards Greece.
So although no firm agenda or plan in place the markets have started to feel more comfortable or possibly bored with the affairs in Greece and investors once again started to dip their toes in again. The USD and the JPY weakened in line with a tentative return to risk. GBP/USD pushed back through 1.57 and tested 1.58 in early trading and EUR/USD pushed through 1.37.
Report by Phil McHugh
Currency Market Updates by Tom Nadir
Currencies Direct is a leading commercial foreign exchange company with offices in the UK, Australia and Spain and has offices across 5 continents. Currencies Direct’s head office and global trading centre is based in the City of London.
The contents of this report are for information purposes only.
BlogCatalog – Finance
Currency Market News on the Brussels Meeting, US Retail data and Celbrations!
15, February 2010
EU finance ministers reconvene in Brussels to discuss further details on EU plans for Greece and the next steps. The euro has taken a beating over the past couple of weeks over the wrangling with Greece and ministers need to tread carefully or risk further fear in the markets and selling of the euro.
Aside from this there is very little to focus on today.
Risk appetite remains weak as Greece and other European countries continue to undermine confidence. In addition monetary tightening in China and comments of revaluing the Yuan are adding to the reduced confidence. In relation to the Yuan Jim O’Neill from Goldman Sachs suggests that China may revalue the Yuan by up to 5%. This may not happen especially during Chinese New Year but it is still a possibility and hence undermining risk.
Better than expected US retail sales data on Friday was at +0.5% for January. It helped to stave off further fear in the markets but was not enough to turn the tide.
Today we have lots of closed markets with a US holiday for President’s day, Family day in Canada and the Chinese New Year leading to markets in China, Taiwan and Vietnam to be closed all week.
With little economic data from Europe we will instead focus on the week ahead with inflation data from the US, UK, Germany, Canada and New Zealand.
Report by Phil McHugh
Currency Market Updates by Tom Nadir
Currencies Direct is a leading commercial foreign exchange company with offices in the UK, Australia and Spain and has offices across 5 continents. Currencies Direct’s head office and global trading centre is based in the City of London.
The contents of this report are for information purposes only.
BlogCatalog – Finance
Currency Market News on The Greek Tragedy, Sterling’s Hangover and A Brighter Dollar
11, February 2010
EU leaders are meeting today in an attempt to lay the foundations for a deal to rescue Greece. Lots of speculation already touted this morning. There has been talk of IMF assistance and then IMF involvement without funding. Germany and France are widely expected to shoulder most of the responsibility in supporting Greece.
The most recent feedback is that aid for Greece will depend on Athens meeting its deficit reduction targets this year. This begs the question, “What if they do not?” Lots of fence sitting which is still leaning to reduced confidence in the markets and associated strength of the safe haven currencies such as the USD and the YEN. Expect more volatility as more news and feedback filters through.
Sterling is suffering from a hangover today after a little too much of Mervyn King yesterday. The Bank of England governor killed off the rally in sterling by leaving the door open for a further expansion of the QE programme. However it was not all doom and gloom from King who dismissed fears that the UK would lose their AAA credit status. Sterling still softer on market fear and Kings comments in early trade today.
The USD experienced further gains yesterday as Fed chairman Ben Bernanke indicated that discount rates could rise sooner than expected. This is the charge to banks for loans directly from the Fed. This tone was taken as hawkish even though Bernanke reaffirmed that interest rates would remain low for a prolonged period.
The Feds tone sharply contrasted that of the Bank of England as the US look towards a withdrawal of liquidity and a rise in cash rates with the potential higher discount rates. This reinforced USD strength especially against sterling.
Report by Phil McHugh
Currency Market Updates by Tom Nadir
Contact Currencies Direct for Corporate or Private Transactions. Open an account today and save money.
The contents of this report are for information purposes only.
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