Trading The Pound Sterling / Dollar Forex Market


 

Trading The Pound Sterling / Dollar Forex Market

We are now well into 2010 but the median price for the key Pound/Dollar forex market has been .6400 since May 2009.

The market has consistently oscillated around the .6400 mark. There have been a few breaks above .6600 and the odd peak below .6000 but we continue to oscillate.

In trading parlance, support levels have held and then given up the ghost. They have then become resistance levels, those resistance levels have then done the same thing. The cumulative effect has been the most minor of moves.

With Goldman Sachs, and others, estimating that the UK economy will grow faster than many in 2011, perhaps the rumours of Sterling’s death have been greatly exaggerated.

The excitement of such positive predictions has bolstered Sterling. In contrast, the Euro has rather been left behind as the tensions in the EU project have come to the fore.

Having said that, it is difficult to be too negative on the Euro. The smaller nations causing the problems are not particularly significant to the total European Union GDP.

The woes over the whole issue will only grow if the European Central Bank does not play a strong-arm policy. At the moment Jean-Claude Trichet, president of the European Central Bank, and others are, indeed, playing hard ball. They are doing this for the fiscal security of the larger nations and we shall have to hope that they continue to do so.

But still the currency markets seem to be in two minds as to the currency of choice. Sterling looked dead and buried in 2009 and the start of 2010 saw a stronger Dollar.

Given the problems hanging over Greece, Portugal and Ireland that have dominated news flows, the target of Sterling parity versus the Euro has drifted away from dealer’s radars as well.

But away from the populist headlines Sterling has appeared more solid. This continued to be the case when the ECB sent out the message that rates in Europe will, probably, remain at 1% throughout 2010. This was also the case when Sterling had a good day after the hawkish comments from Bank of England policy setter Andrew Sentance.

Yes Sterling has benefited from the woes of the Euro. However, more recently the UK has seen a surprise jump in inflation. That gave the BoE enough evidence that the UK stimulus has to stop.

As Simon Denham of Financial Spread commented, “UK inflation should be capped and the rate of inflation should only be a temporary spike. The VAT hike will also apply pressure. The UK’s growth prospects do not warrant inflation to remain higher for long”.

Perhaps Mr Denham is suggesting that UK rates will also remain low and not support the Pound for long.

Having said all this, whether you are trading the Forex markets or spread betting on Pound/Dollar markets you need to be careful. Forex markets are rarely a one way bet. Like inflation they have a habit of spiking when you least expect it.

A leading financial author based in the heart of London’s Canary Wharf. Thomas Bainbridge is a respected commentator on the UK financial markets including the spread betting and share trading markets


Article from articlesbase.com

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S&P Gives Sterling A Boost


 

Sterling got a boost from Standard and Poors yesterday while the US Dollar recovered amidst reviving consumer confidence. Further US economic data is due out this afternoon.

27, October 2010

The UK’s unexpectedly strong growth over the last quarter gave sterling a significant boost. The surprise rise in 3rd quarter GDP to 0.8% was led by the services and construction sector, prompting economists to up their growth forecasts for 2010 to around 1.8%. Sentiment was also helped by Standard & Poors affirmation of the UK’s AAA rating and restoring its outlook from ‘negative’ to stable as they stated “the coalition parties have shown a high degree of cohesion in putting the UK’s public finances onto what we view to be more sustainable footing”.

The S&P announcement was seen by George Osborne as a “vote of confidence” in the government in a “double-dose of good news” for the economy. However, markets need to be aware of the fact that the recent cuts announced in the UK have not fed through the economy yet. Above-trend growth coupled with above-target inflation will leave the Bank of England with little reason to return to quantitative easing and adds weight to Sentence’s hawkish stance that it is high time for a rate hike.

Preliminary German Consumer Price Index figures headline the economic calendar in European hours, with expectations calling for the annualised inflation rate to hold at a manageable 1.3 percent. The outcome may not prove particularly market-moving, reinforcing established expectations that the European Central Bank will remain on hold for the foreseeable future.

The US dollar also regained some ground as confidence amongst US consumers rose from a 7-month low. Although households turned less pessimistic on the outlook for the economic recovery, American’s views on job availability and wage prospects soured, highlighting the risk that unemployment hovering around 10% in the US will limit future spending. In addition, concern over deteriorating property values may also be weighing on American psyche.

Dollar sellers now appear to be in the process of locking in some profit as investors hold steady ahead of Friday’s US Q3 GDP figures and the Federal Reserve’s policy meeting next week. An element of caution is now starting to infiltrate the markets as thoughts turn to what steps the Fed might take to assist recovery in the States and the form of any further stimulus packages.

The Australian Dollar sank against the spectrum of major currencies after third-quarter Consumer Price Index figures fell short of expectations, weighing heavily on the outlook for future interest rate hikes. The report showed the annual inflation rate cooled to 2.8 percent, the lowest yet this year while the quarterly increase amounted to a smaller-than-expected 0.7 percent.

US economic data out today includes durable goods for September with expectations of a rise of 2%, after last months 1.5% decline. New home sales for September are also out slightly later on, and a rise of 4.2% expected.

Report by Tim Lewis

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Selling Sterling Short


 

Currency Market News on the UK’s Bulging Deficit, German ZEW Survey and the FOMC Minutes

16, March 2010

Following over two weeks of selling pressure the market seems to be running out of new reasons to sell the pound. Sterling selling is running out of steam. We have already heard lots about a hung parliament, the deficit, weak growth prospects, QE and negative M&A flows. The pound has undoubtedly struggled but it seems to have found a bottom for now at 1.50 against the USD and 1.10 on the euro.

Recent news that hit the pound was that the European Commission is concerned about the UK’s bulging deficit and the UK needs to dramatically enforce it’s fiscal programme. This did lead the pound lower but it has bounced back and this to me signals that we may have limited downside potential unless we see anything new to attack sterling. The key level against the USD is for a move back over 1.52.

Today we had the German ZEW survey which came in slightly better than expected but lower than last months reading. Therefore this shows a six month consecutive decline in the ZEW survey reinforcing the weak sentiment for Germany. However the euro has held firm and is at the moment above 1.37 against the USD.

Later we have the FOMC minutes and once again the language from the Fed will be all important. Basically if the Fed turn more hawkish then this will allow the USD to rally….the language in recent statements has maintained the “extended period” for keeping interest rates at low levels. With better recent economic sentiment it will be interesting to see if this is reflective in the FOMC.

Report by Phil McHugh

Currency Market Updates by Tom Nadir

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US Consumer Confidence Fragile


 

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

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USD Shines After Positive Minutes


 

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

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UK Unemployment Rises Again


 

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

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Greece Bring EU To Its Knees As Others Celebrate!


 

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 & Forex trading

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.

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Will There Be A Deal For Greece?


 

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

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