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Last Week’s Recap: GBP/USD started the week trading off its weekly low of 1.5532 on Monday ahead of a disappointing U.K. Trade Balance release on Tuesday that showed a deficit of -3.55 Billion Pounds versus a consensus of -3.1 Billion. Cable then rallied to its weekly high of 1.5764 on Wednesday after U.S. Trade numbers showed the deficit had increased to a surprising -$40.2 Billion in December, versus a consensus of -$35.8 Billion.

GBP/USD then traded lower towards the end of the week as BOE Governor King, speaking at a press conference on the BOE’s Inflation report, confirmed that a decision to put on hold the government’s bond purchasing program was not yet definitive.

Also, the BOE lowered its estimates on GDP growth and raised estimates on inflation in the short-term, projecting a 3% Y/Y growth rate by late 2010 and for inflation to rise to over 3% in early 2010, should interest rates remain at 0.5%. Cable ended the week at 1.5697, up 0.4% for the week.

This Week’s Outlook:
This coming week has some interesting economic data due out in the United Kingdom. The U.K. calendar starts on Monday with Rightmove House Price Index (last 0.4%M/M), followed on Tuesday by the Consumer Price Index (3.6% and 3.2% core Y/Y), plus the tentatively-scheduled BOE Inflation Letter.

Look for Wednesday to be the highlight with the Claimant Count Change (-14.6K) followed by the Monetary Policy Meeting Minutes with the vote expected at 0-0-9 against any change in policy. The U.K. employment rate is also expected to remain unchanged at 7.8%.

On Thursday, look for Public Sector Net Borrowing (-2.4B) and CBI Industrial Order Expectations (-35), plus a speech by MPC Member and BOE Director Fischer in London. Friday’s Retail Sales (-0.5%) release closes out the coming week.

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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