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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BoE Keep Interest Rates On Hold


 

Currency Market News on BOE Interest Rates, Germany and Greece and the US Non-Farm Payroll Data

5, March 2010

As the BoE  keep interest rates on hold at 0.5%, the asset purchase programme was held at £200 billion. The stronger PMI data this week and the improvement in the revision of Q4 2009 GDP has helped the MPC to be comfortable in their current wait and see policy.

An article in the Telegraph interestingly pointed out that if it was not for QE the UK would still be in recession. That could well be the case. The fact that there was no expansion helped to keep sterling supported just over 1.50 against the USD and 1.10 the euro. We really need to see a move beyond 1.52 before we can start to relax a little.

Over to the ECB and as expected they also kept rates on hold at 1%. They announced that it will continue to scale back their special lending measures as expected and equally as expected Trichet dodged the difficult bullets concerning Greece and gave little away. Yesterday’s Greek bond issue was a real success and this gave the markets a boost backing up the recent austerity measures introduced. The market is aware that we are not out of the woods but this certainly helps. Expect further wranglings with Greece but nice to get some good news for a change.

Today the German and Greek heads are meeting. Should be a spicy meeting after yesterdays comment from the German Economics Minister who said that the German government has no intention of offering Greece “even one cent” and that each country has to take care of its own affairs…..would be nice to be a fly on the wall for this meeting.

Later today we have the big US non-farm payrolls number but even this has lost some of its importance with the appalling weather expected to have considerably distorted the numbers. In a way this could prove to be Dollar positive with the whole community expecting a weak number therefore reaction should only materialise from a surprisingly better result.

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.

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.

The contents of this report are for information purposes only.

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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

Currency Market Updates by Tom Nadir

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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

Contact Currencies Direct for Corporate or Private Transactions. Open an account today and save money.

Currencies Direct & Forex trading

The contents of this report are for information purposes only.


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