Euro Pounds Currency Brief February 2008

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Friday 29th February 2008 Interbank
GB POUNDS / EURO  1.3041
EURO / GB POUND 0.7668


UK house prices fall for fourth straight month in February.

Pounds:

The pound continued to fall against the single currency as the flow of data which came out yesterday continued to be in the euros' favour. UK house prices fell by –0.5% in February, while the annual gain was the lowest since November 2005, according to the Nationwide Building Society.

Investors will be watching closely the consumer lending figures which are due out at 10.30am today which are expected to show that mortgage approvals have slipped further in January.

The pound is now at a record low against the Euro as the rate has hit 1.3068.

Data at 10.30am: GfK Consumer Confidence Survey expected at –15 from –13 previous.


Euros:

The Euro extended its rally against the dollar to another record high after poor jobs data and a repeat performance by the Feds Bernanke, who did little to offer any support to the dollar.

The Euro gained a full 1 per cent against the greenback to hit an all time high of $1.5231. This is the third straight session in which the Euro has gained to record highs.

We have seen good data posted by Germany this morning as Retail Sales rose higher than expected in January. Retail sales rose 1.6% on the month.

Be aware today, as its Friday under after the rise of the Euro, it may be under some pressure from the dollar and yen as a bit of profit taking may come into play before the weekend.

Data at 10.00am: Euro-zone CPI expected at 3.2% from 3.1% previous.


General Euro Currency News:

• Oil prices surpassed $103 a barrel for the first time as continued weakness in the dollar and prospects of lower interest rates attracted fresh capital to the oil market.

• MF—a leading broker of exchange-traded futures and options, announced that a registered representative trading in the wheat futures market, exceeded his trading limit—resulting in him incurring a loss of $141.5 million.

 

Thursday 28th February 2008 Interbank
GB POUNDS / EURO  1.3102
EURO / GB POUND 0.7619


Consumer spending in UK drops to two-year low.

Pounds:

Data released yesterday has compounded the view that the UK is already in the grip of a sharp downturn as figures show consumer spending has dropped to a two-year low.

The UK’s exports also fell by 0.5% in Q4, although the GDP figures confirmed that overall growth in Q4 was a robust 0.6%, inline with initial estimates.

The pound had a poor day yesterday as it slipped of slightly against the dollar, after taking almost 2 cents of the greenback on previous days trading, dropping over 1 cent to be trading at $1.9801.

Against the euro the pound also lost ground and lost one and a half cents, from 1.3262 to 1.31 .

No data today.


Euros:

The euro hit record highs against the dollar yesterday as the $1.51 level was breached in afternoon trade.
This was on the back of the US Fed’s Chairman indicated more interest rates cuts were on their way in the US. The euro climbed as high as $1.5143 after comments named worries on economic growth outweighed inflation concerns. Also, investors are getting a sense from European Central Bank officials that they don’t mind a stronger euro and may be encouraging it in the face of higher inflation rates.

The single currency also gained over 1 per cent against sterling as the 0.76 level was breached, currently trading at 0.7621.

Data at 8.55am: Germany’s Unemployment Change expected at –48k from –89k previous.


General Euro Currency News:

• The Australian dollar has continued to strengthen against a basket of currencies as its booming economy and housing market continues to excel. Against the pound the dollar has gained over 2 cents.
Investors are calling for an interest rate rise next month, and one more maybe in May.

• Oil prices are higher today after dropping more than a dollar the previous session on larger-than expected increases in US crude and gasoline supplies. Oil rose 19 cents to $99.83 per barrel.

• Gold is down 30 cents at $958.60, but investors are looking for the $1,000/oz on back of weak dollar.

 

Wednesday 27th February 2008 Interbank
GB POUNDS / EURO  1.3194
EURO / GB POUND 0.7579


Key level breached as Euro breaks $1.50 level against the dollar.

Pounds:

Sterling seemed to feed on the back of a weak dollar yesterday as a move towards the $2.00 mark is back on the cards. The move came at 5.00pm last night as the dollar started to weaken against a basket of currencies and lost over 2 cents against the pound.

The pound has hit $1.9940 already this morning and it won’t take much to breach the $2.00 mark.

Against the euro, the pound is little changed, slightly down from yesterdays opening. There was also a warning by the deputy governor of the Bank of England that the central bank fears the largest ever peacetime liquidity crises. The BoE’s Rachel Lomax warned that the ongoing credit crunch had left the Monetary Policy Committee uncertain as to its next move as it and fellow central banks face up to the disruption to the financial markets.

Data due at 9.30am: GDP (QoQ) expected at 0.6% unchanged from previous.


Euros:

What a day for the euro! The single currency finally broke through the key $1.50 level against the dollar and so far, has kept going. The ever widening gap on interest rates between the eurozone and the US has helped the euro push through the previous key level and hit $1.5050 in Asian trading.

Concerns that the US might lapse into stagflation, a condition where a recession and inflation simultaneously occur, also prodded non- Japanese investors into trimming their holdings of dollar-denominated assets. Is seems traders feel the euro has the momentum to start rising again and go above the $1,50 level in coming sessions. The single currency was also helped by better than expected data from Germany’s ifo index as it rose to 104.1 in February, above the 102.9 level expected.

ECB’s Wellink to speak at 11.45am


General Euro Currency News:

• Oil prices broke above the $100 per barrel yesterday and has already gone through $101 today. The slide in the US dollar prompted investors to pump more money into energy futures as a hedge against inflation. Oil hit $101.06 per barrel while Brent crude rose to $99.60 per barrel.

• Gold hit a record high at $956.35 per troy ounce after falling back to $953.50. This had a slight knock on effect for the South African Rand as it pulled back some of its losses seen over the last few weeks.

 

Tuesday 26th February 2008 Interbank
GB POUNDS / EURO  1.3286
EURO / GB POUND 0.7524


Nationwide squeezes all but the most cash-laden buyers.

Pounds:

Sterling was fairly quiet yesterday as it remained more or less unchanged against the majors. It seems the small rally against the dollar has come to a halt, even after poor economic data from the US yesterday.

The slightly higher yielding currencies were the biggest winners as investors tipped their toes back into the carry trades.

Data at 11.00am: CBI Distributive Trades Reported Sales.


Euros:

The euro remains supported by interest in carry trades and still hawkish commentary from the ECB. It is widely expected that the slowdown in the US will also drag down economic growth in the 15 nation euro zone, which looks set to expand well below its potential growth rate of 2%.

The focus for today will be the release of Germany’s ifo business climate index which is forecast to fall to 102.8 after last month’s 103.4. The trouble with all the data soon to be released, may be will it make the ECB change it’s policy? What may have more of an influence may be what will happen with the wage settlements.

The euro dropped back slightly against the dollar as it failed to push through the $1.49 level. Germany’s GDP increased by 0.3% in the 4Q and 1.8% up on the year, as expected.

Data at 9.00am: Germany IFO expected at 102.8 from 103.4 previous.


General Euro Currency News:

• Mortgage buyers unable to muster a big deposit have become the latest victims of the credit crunch after Britain’s biggest building society effectively shut it’s doors to all but the cash rich. Any borrowers wanting a loan of more than 75 per cent of a property’s value will pay higher rates of interest to reflect the increased risks involved.

• Oil is little changed, rising only slightly on back of rising chilly weather in the US. Price per barrel is $99.29 after a 6 cents rise.

• Wheat prices jumped 25% to a record high yesterday as Kazakhstan, one of the largest grain exporters , said it would impose export tariffs to curb sales.

 

Monday 25th February 2008 Interbank
GB POUNDS / EURO  1.3260
EURO / GB POUND 0.7544


UK house prices fell for fifth straight month according to Hometrack.

Pounds:

This week sees some key data released with UK house prices, lending and GDP growth data due, but it does- n’t look like they will change the market view that the Bank of England will cut interest rates gradually this year.

According to housing research firm Hometrack, UK house prices fell for a fifth month running in February, but it did show there were signs that demand is beginning to pick up. Hometrack specializes in providing research and data on residential property. One piece of data to keep an eye on will be the Nationwide Building Society which will release its housing index figures on Thursday.

The pound is slightly down from Friday against the euro and dollar, falling around 0.2% against both major currencies.

Data at 9.30am: BBA Loans for House Purchase


Euros:

It seems the euro has pulled back slightly against the dollar as it has tried to hit the $1.50 level, so far the high has been $1.4968. On Friday the euro hit a three week high against the greenback on stronger than expected eurozone data. Investors are still waiting to see the full picture of just how weak the US economy is.

We will have to wait and see if the euro has the legs to breach the psychological and thus far unreachable $1.50.

The strong data tempered market expectations of an imminent rate cut by the ECB, although market commentators maintained their view the central bank would be forced into delivering lower rates in the near future.

Data at 9.00am: Italy Retail Sales expected at _0.1% from –0.3% previous. Bundesbank’s Zeitler to speak.


General Euro Currency News:

• Oil prices rose near $100 dollars per barrel as the Turkish incursion into northern Iraq and warnings by Iran against further sanctions heightened concerns over potential crude supply. Trading around $98.81.

• There are alleged reports that the UK has paid a whistleblower in Liechtenstein to release names of UK tax evaders.

• Spot gold rose to $947.30 per troy ounce on the back of inflationary concerns and a bullish market.

 

Friday 22nd February 2008 Interbank
GB POUNDS / EURO  1.3275
EURO / GB POUND 0.7548


UK posts stronger than expected retail sales figures.

Pounds:

The UK finally had some positive data to feed off yesterday as Retail sales posted its strongest monthly gain in 11 months in January. Retail sales rose 0.8% on the month and 2.8% gain on the year in December, but be aware, this does seem to have been massively helped by the high street slashing prices to boost sales. The surprising strength of retail sales is likely to reinforce the Bank of England’s caution as it cuts interest rates to counter an expected slowdown in the economy.

The pound rose 0.55% against the single currency, from 1.3205 to reach 1.3272. Sterling’s biggest gain was against the greenback, as poor US data helped sterling push through the 1.95 level and it just kept on going. Two cents were gained as the pound rests around $1.9643.


Euros:

The euro has had a mixed end to the week, benefiting from the dollars dramatic plunge southwards yesterday , but loosing ground against sterling. A key level was breached against the dollar as the euro broke through $1.48, reaching $1.4812.

Against sterling the pound lost ground after strong UK data helped push the euro from 0.7575 to 0.7530.

Data at 9.00am: Euro-zone PMI Manufacturing expected at 52.3 from 52.8, PMI Services expected at 51.0 from 50.6 previous and Industrial New Orders expected at –1.1% from 2.7% previous.


General Euro Currency News:

• Oil pulled back yesterday and dropped 15 cents to hit $98.08 per barrel.

• Gold fell as well after falling 50 cents to close at $945.80 and it seems that higher oil prises are needed to push the precious metal back up above the $950.00 level.

• Reports that there may be another German bank facing the need for a dramatic writedown, says German Finance Minister Peer Steinbrueck. This is on top of German bank IKB which fell victim to the subprime crises last year.

 

Thursday 21th February 2008 Interbank
GB POUNDS / EURO  1.3287
EURO / GB POUND 0.7526


Bank of England minutes reveal 8-1 in favour of rate decrease.

Pounds:

The minutes from the Bank of England revealed that the split to cut rates was 8-1 in favour of the 25 basis point reduction. Only one member voted for a 50 basis point cut.

Sterling had a pretty weak day yesterday as it dropped half a cent against the euro to be very close to breaking through the 1.32 level, and against the greenback the pound fell a full cent from yesterdays opening price but it did recover most by close of business.

It is now trading at $1.9455. It’s hard to see where any support will come from for the pound, as aggressive rate reductions in the US don’t seem to be giving sterling any help, and the ECB’s continued approach to focus on inflation worries rather than the bigger global picture don’t seem to be helping on the euro.

Data at 9.30am: Retail Sales expected at 0.3% from –0.4% previous.


Euros:

The euro continued to be the steady ship in choppy seas yesterday as it gained slightly against sterling and continued to be range bound against the greenback.

The single currency gained half a cent against the pound as BoE minutes revealed at least one member voted for a 50 basis point cut.

Against the dollar we are still range bound, but if the $1.50 level is breached, the euro may have some way to go.

Data at 9.00: Italy Consumer Confidence expected at 102.2 from no change.

Eurozone Current Account at 10.00 expected at 0.2B from 0.7B previous.


General Euro Currency News:

• Oil prices hit a record high yesterday at $101.32 per barrel before dropping off slightly to close at £100.74.

• Japan’s trade deficit rose more than expected in January to 79.34 billion yen, a whole different picture from a year earlier when the deficit was 3.49 billion yen. A huge rise!

• The South African Rand had a very poor day yesterday as it suffered its worst day against the dollar in three months and dropped to 15.30 against the pound. This was after it was revealed government restrictions look set to ease on overseas investments.

 

Wednesday 20th February 2008 Interbank
GB POUNDS / EURO  1.3234
EURO / GB POUND 0.7552


BoE committee member says inflation worries may slow rate cuts.

Pounds:

According to a member from the Bank of England’s monetary policy committee, the central bank would be considering even deeper interest rate cuts were it not for worrying signs that inflation is likely to spike soon and stay high this year. Kate Barker has highlighted weaker property prices and the ongoing subprime crises and the significant possibility of a large downside risk to growth, and therefore to inflation. We will wait and see what the minutes released today will show with regards to what the members were thinking.

The pound has not had a good week against the euro or the dollar. Its hard to see where any support will come from as sterling has now dropped below the $1.95 against the greenback and 1.33 against the single currency.


Euros:

Data out this morning showed German Producer Prices accelerated more sharply than expected in January, primarily due to energy costs.

Forecasts had predicted a 0.2% rise on the month and 2.7% for the year, but the stronger date came out at 0.8% for the month and 3.3% on the year.

The European Central Bank keeps a close eye on producer prices to gauge the pass-through of producer prices to consumer prices and any effects on inflation. Inflation is the key for the ECB as they stick to their guns that this remains their primary focus rather than the worldwide financial crises, which is keeping other central banks busy.

Data out already was better than expected German PPI figures as above


General Euro Currency News:

• Oil has dropped off slightly this morning after closing above $100 a barrel for the first time overnight as investors seized on a refinery explosion and the possibility that OPEC may cut its output. Current price is $97.73.

• It seems more rate hikes will be on the way in Australia as she battles higher inflation amid continued high global prices for commodities which is a key driver of its economy.

• Platinum rose 2.1% to $2,150 per troy ounce after reaching a record $2,160 in the session because of concerns about South Africa where power supply difficulties continue to cause production problems.

 

Tuesday 19th February 2008 Interbank
GB POUNDS / EURO  1.3236
EURO / GB POUND 0.7555


Nationalisation of Northern Rock buoys shares but weakens pound.

Pounds:

The pound had a torrid time yesterday as is dropped against a basket of currencies. Sterling dropped 0.4% against the euro from 1.33 to 1.3247 and against the greenback the pound dropped 0.2% to hit 1.9483. The main reason for the decline in the pound seems to be the UK Chancellor's announcement to nationalise the beleaguered UK bank Northern Rock. A quote from the government press release said ‘Its business as usual’. Of course, its not actually a bad description. It is indeed business as usual at Northern Rock. The bank’s still bankrupt, and the government is still the only thing keeping it afloat. The only thing that’s changed is its now official.

One story which does seem to be in the newspapers as much as the Northern Rock fiasco, is how long can the UK Chancellor ’Alastair Darling’ last in his position as he seems to be stumbling from one crises to another.

Data: No data today.


Euros:

The euro came out as the winner yesterday as it gained against the pound and the greenback. Against sterling it rose 0.4% from 0.7518 to 0.7540, and against the greenback the euro has gained over 0.45% to hit 1.4725.

According to the German Bundesbank, the European Central Bank is still concerned about upside risks to eurozone inflation over the longer term, in light of “dynamic” money in credit growth and robust economic activity. One of its worries is the wage demands in Germany, and the ECB has urged social partners to reach wage deals that are moderate in order to aid job creation.

Data at 10.00am: Construction output and ECB’s

Quaden to speak at 5.00pm


General Euro Currency News:

• Minutes released by the Reserve Bank of Australia have shown that a 50 basis point hike was discussed, leading investors to think that more rate moves upwards are on the cards. The Aussie dollar has gained over 1% against the pound since this time last week.

• The Financial Services Authority says shares of Northern Rock have been temporarily suspended, a move that is to be followed by a formal delisting.

 

Monday 18th February 2008 Interbank
GB POUNDS / EURO  1.3305
EURO / GB POUND 0.7506


UK Chancellor announces nationalisation of UK bank Northern Rock.

Pounds:

Figures released this morning by online estate agent ‘Rightmove’ showed the average asking price for a home in the UK rebounded in February. This seems to be on seasonal factors and recently introduced rules, which may be deterring sellers and underpinning prices.

It seems the Bank of England's decision to loosen monetary policy in December and February had given sellers more confidence, but the market will be cautious and may not read to much into Februarys bounce.

The pound has had a bad start to the week against the majors, dropping 0.8% against the dollar and 0.65% against the single currency since Friday. The pound is in danger of breaking through the $1.95 & and 1.33 against the dollar and euro respectively.

Data: Rightmove figures show 3.2% rise on the month and 5.8% rise on the year.


Euros:

The euro is little changed against the dollar and yen as most dealers expect narrow ranges. Against the pound, the euro has gained 0.65% and broken through the 0.75 level.

This morning the single currency hit and broke through 0.7518 (1.33) but has fallen back slightly to trade at 0.75.

In an interview in the Financial Times, Christian Noyer Governor of the Bank of France was asked if we have seen the end of the sub-prime hit in French banking. His reply was not all banks have announced their fourth quarter results, so there may be more bad news to come from the eurozone.

Data: No data today, ECB’s Quaden presents annual report on Antwerp.


General Euro Currency News:

• Northern Rock shares suspended—Alistair Darling announces the first nationalisation of a sizeable British Bank in a quarter of a century.

• Oil prices are slightly higher on Monday after further hints that OPEC may cut production if global supplies continue to rise and amid forecasts for slower growth in demand.

• Gold is up by $3.05 per troy ounce to trade at $904.25

 

Friday 15th February 2008 Interbank
GB POUNDS / EURO  1.3423
EURO / GB POUND 0.7423


Sterling at two week high against the euro.

Pounds:

The pound had a rally yesterday against the euro and dollar, making a gain of 0.25% & 0.3% respectively.
The pound has held firm going into this morning’s session against the single currency, but has given up its gains against the greenback. Sterlings rise against the euro is a two week high and the rally seems to be on the back of investors trimming back bets on future UK rate cuts in the wake of the Bank of England’s inflation report. The break through $1.97 was also the first break through that level in over a week.

No data today.


Euros:

ECB’s Trichet repeated his stance that there were no calls for higher or lower interest rates at the ECB’s last governing council meeting a week ago. Trichet is keeping a close eye on the unions in Germany as they are threatening to strike unless their pay demands are met, and he is using this as a now standard warning against second round inflation. He re-iterated that the ECB must anchor inflation expectations as it’s primary business.

Data at 10.00am: Eurozone Trade Balance (Dec) expected at 0.5B fro 2.6B previous.

ECB’s Quaden to speak at 10.45am.


General Euro Currency News:

• Gold rose $1.50 per troy ounce to hit $909.70. Concerns about economic growth are still simmering under the surface and supply issues keep the base metal high.

• A report in the FT has pointed to UK companies facing the prospect of having to add billions of pounds to their pensions liabilities under plans to be unveiled by the regulator to force them to use more realistic projections of how long workers will live after they retire.

 

Thursday 14th February 2008 Interbank
GB POUNDS / EURO  1.3471
EURO / GB POUND 0.7423


UK interest rates unlikely to fall as much as predicted

BoE governor Mervyn King says ‘inflation may hit 3% this summer’

Pounds:

The Bank of England released its Quarterly Inflation report yesterday, and it looks like Mervyn King will have to write another letter to Alistair Darling , the chancellor, explaining why inflation had risen so far above its 2 per cent target. King warned that he predicted the economy was likely to come close to a halt in coming months. On the back of this, economist rapidly revised their forecasts of rate cuts, with most now expecting rates to fall by two more times by next March, to stand at 4.75%. This gave the pound a boost yesterday as it gained 0.3% against the euro to hit 1.3485, and gained well over a cent against the greenback, now trading close to 1.97 the figure.

No data today.


Euros:

ECB governing council member Guy Quaden seems to have broken ranks and finally admitted that there are signs that eurozone economic growth is slowing faster than expected and that the European Central Bank no longer is in a “wait-and-see” mode.

The ECB has held its key rate steady at 4.0% since June, citing worries about accelerating inflation, but now the prospect of slow growth may hint at a change in rhetoric.

The euro was up slightly against the dollar, but down from 0.7440 to 0.7418 against the pound.

Data at 9.00am: ECB publishes Monthly Report, Eurozone GDP at 10.00am expected at 2.2% from 2.7% previous.

ECB’s Trichet to speak at 12.30


General Euro Currency News:

• Oil prices held firm yesterday, with concern still hovering around the Venezuelan threat to halt oil sales to US. Price per barrel is $93.47.

• Gold also seems to be in a holding pattern. Tonight's speakers, notably Bernanke and Paulson may push the precious metal higher if they voice more concern regarding the US economy.

• The Swedish Central Bank raised interest rates by 25 basis points to 4.25 per cent. The move wrong footed analysts who had predicted the worries over global growth to refrain any change.

 

Wednesday 13th February 2008 Interbank
GB POUNDS / EURO  1.3466
EURO / GB POUND 0.7426


Annual rate of inflation in UK rises to 2.2%.

UK House Prices fall—RICS survey most negative balance since 1992.

Pounds:

The annual rate of consumer-price inflation in the UK rose further above the Bank of England's 2.0% target in January. However, with retailers discounting heavily, the reading was softer than the 2.4% expected by economists. On the month the CPI fell by 0.7% and climbed 2.2% on the year.

Sterling fell against the majors on the back of these figures, losing half a cent against the dollar to $1.9443 and lost about 50 ticks against the euro.

This morning we have had the RICS survey (UK House Price Survey) out and 54.7% of surveyors showed a fall in 3 months to Jan, the most negative UK House Price Balance since November 1992.

A failure by mortgage lending companies to pass on interest rate cuts to the consumer may be adding to the housing market woes.

Data-9.30am: Jobless claims, Average Earnings, Unemployment Rate. 10.30am:BoE Quarterly Inflation Report.


Euros:

The Euro climbed against the dollar yesterday for the third straight session after the ZEW index survey of German Financial analysts and institutional investors unexpectedly improved in February. ECB officials also seem to be re-affirming their main goal of price stability and possibly trying to dampen down market expectations of near term rate cuts. We are expecting more of the same language over the next few days.

No data today. ECB’s Trichet to speak at 2.20pm


General Euro Currency News:

• Japanese annual wholesale inflation hit a 27 year high of 3 percent in January due to rising oil and other raw material costs. But it seems the Bank of Japan is likely to sit tight on rates in the face of global economic growth.

• Oil prices remained high yesterday, as Venezuela said it had stopped selling crude to the worlds biggest oil company. The reason seems to be Venezuela’s response after US owned Exxon Mobil’s court bid to freeze billions of dollars in Venezuelan assets.

 

Monday 8th February 2008 Interbank
GB POUNDS / EURO  1.3408
EURO / GB POUND 0.7459


Bank of England to warn of a high probability that it could miss its inflation target.

Pounds:

Sterling has lost ground against a basket of currencies after the latest round of rate decisions by the BoE & ECB. The pound is also under pressure this week as we head towards the closely watched inflation report which, it is thought the central bank will use to warn of a high probability that it could miss its inflation target in the coming months. The bank is expected to raise its near term projection for the Consumer Price Index, implying a significant chance that it will rise above 3pc, forcing the governor to write a letter of explanation to the chancellor.

The pound has lost over a cent to the single currency to be trading at 1.3338, and 0.2% against the greenback, now trading at 1.9425.

Data at 9.30am: Visible Trade Balance expected at -£7400 from -£7377 previous, Producer Price Index expected at 0.8% from 0.5% previous, producer Price Index Core expected at 0.3% from 0.4% and DCLG UK

House Prices expected at 8% from 9.5%.


Euros:

The European Central Bank President jean-Claude Trichet has indicated that the bank would not necessarily ease it’s monetary grip in step with moves by the US and the UK, in an apparent effort to quell growing market speculation about a rate cut. Trichet made his comments at a time of growing expectation in financial markets that the ECB will cut it’s rates soon, despite it’s latest decision on Thursday to leave rates unchanged.

The single currency has gained over a full cent against sterling, from 0.7433 on Friday to 0.7497 this morning.

Data today: French Industrial Production came in this morning up 0.7% on month lifted by an increase in car and food production.


General Euro Currency News:

• In Australia, the Reserve Bank of Australia raise its forecast for core inflation to 3.75% by mid 2008 from an earlier projection of 3.25%. The statement was the most hawkish for some time, openly discussing the need for higher interest rates in the future.

• In the Telegraph, an author reports that there are worries that Japan may be the next sub-prime flashpoint.
There are rumours that there is still $300bn of bad debt out there and Japan could be hiding most of it according to Ambrose Evans-Pritchard.

• Oil rises after Venezuelan President Hugo Chavez threatened to cut off oil supplies to the US—$92.19

 

Thursday 7th February 2008 Interbank
GB POUNDS / EURO  1.3401
EURO / GB POUND 0.7497


Markets await Bank of England interest rate decision at midday.

Pounds:

All eyes will be on the Bank of England today as they reveal which way they turn with interest rate cuts. The consensus is for a 25 basis point cut, rather than the aggressive 50 basis point cut some people are calling for. The BoE have been helped slightly over the last few weeks with some positive economic data, taking pressure of inflation.

Yesterday Alistair Darling, the Chancellor promised measures to breathe life into the ailing mortgage market amid fears that the UK was heading for a housing slump. This is seen as a surprise intervention the night before today’s interest rate decision by the BoE’s Monetary Policy Committee. The Chancellor also moved to reassure homeowners that the UK was NOT heading for a housing crash, despite recent falls in house prices.

Data at 9.30am Industrial Production expected at 0.2% from –0.1% previous. BoE Rate decision at 12.00


Euros:

The euro is lower against the dollar amid caution ahead of the European Central Bank press conference with the ECB President Jean-Claude Trichet later today. The markets will watch for any softening in the ECB’s tough anti-inflation stance. If Trichet implies that the ECB may change its hawkish stance, investors may well see that as a sign to sell the euro. Investors seem to begin to feel that Trichet is pushing the euro into a difficult position, with its single minded view that they are only looking at inflation worries, and not the bigger global picture.

Data at 12.45: Markets are expecting the ECB to keep rates steady at 4.00%


General Euro Currency News:

• The average family's mortgage burden in UK has now equalled the peak it scaled during the last housing crash almost two decades ago according to research by a key advisor to Gordon Brown.

• The Rand was still under pressure yesterday as it broke through the 15 level against sterling for the second time in the last few weeks. Fears about power supply are still weighing over South Africa.

• Oil prices are lower today.

 

Wednesday 6th February 2008 Interbank
GB POUNDS / EURO  1.3401
EURO / GB POUND 0.7497


UK PMI data eases pressure on BoE to aggressively cut rates.

Pounds:

The pound held firm yesterday with better than expected business activity coming in at 52.5, slightly up from the expected figure of 52. This may help the Bank of England with how far it moves to cut rates when it meets tomorrow. The markets seem to have already priced in a cut of 25 basis points, but some were looking for a more aggressive cut of 50 basis points. The data released yesterday may have helped the central bank come to their decision already. Although, data released this morning showed that UK Consumer Confidence has sank to a record low according to UK lender Nationwide. The pound rose 0.8% against the euro to 1.3414, but dropped against the dollar by 0.4% to $1.9640.

Data at 10.30am: BRC Price Index, Leading Indicator Index at 3.30pm


Euros:

The Purchasing Managers Services Index fell from 52 in December to 50.6 in January for the whole eurozone.
This alongside the poor retails sales data suggests market expectations that the ECB will cut rates at some point this year, may happen sooner rather than later.

The ECB may have to reign in their hawkish stance on interest rates slightly, otherwise the markets may start to question the reliability of the central banks press conferences.

The euro dropped 1.2% against the dollar to $1.4640 and 0.8% against sterling to £0.7455.

No data today.


General Euro Currency News:

• Even though the Australian Central Bank raised interest rates to 7%, the following statement was seen by the markets, as not hawkish enough to be followed up with another rate rise next month. This weakened the Aussie dollar to drop by 15 against sterling, currently at 2.1901

• The weak data released from the US had a dramatic knock on effect on the worlds stock markets. They recorded their worst performance in almost a year, with a coming recession looking more likely.

• Oil and gold were the losers yesterday as the weak PMI data from the US weighed heavily on both commodities. Oil fell $1.61 to $88.82 per barrel, and gold dropped 1.4% to close at $891.70.

 

Tuesday 5th February 2008 Interbank
GB POUNDS / EURO  1.3413
EURO / GB POUND 0.7497


UK-Expectations of moderate rather than aggressive rate cuts on way.

Pounds:

The pound was lifted from last weeks lows amid expectations that the Bank of England on Thursday will cut interest rates more modestly than earlier speculated, likely by 25 basis points instead of 50.

To try and stimulate the UK economy, Chancellor Alistair Darling last night hinted that he could use his inaugural Budget next month to cut taxes. His comments will raise expectations that the Government may cut taxes in an effort to ward off the threat of a recession. This is contrary to current expectations whereby the government may have to raise taxes to maintain there golden rule. This seems to be following the trend of what is happening in the US.

The pound remains unchanged against the dollar and Euro this morning.

Data at 9.30am: Purchasing Manager Index Services expected at 52 from 52.40 previous.


Euros:

The euro is narrowly mixed against major currencies with only minor movements. The single currency is finding support from expectations that the European Central Bank will remain hawkish after its latest policy meeting ends on Thursday. Even the poor US jobs report on Friday failed to rally the euro through the key $1.50 level. This is seen as a key level which the single currency has failed to breach on a number of occasions.

Data at 9.00am: Eurozone Purchasing Manager Index expected at 52 unchanged. At 10.00am we have Eurozone Retail Sales expected at 0.2% from –0.5% previous.


General Euro Currency News:

• The Australian central bank have raised interest rates by 25 basis points to 7% which is a twelve year high. This is on the back of strong inflation and housing data, which bucks the trend of world interest rates cuts. This emphasises that differences in local economic conditions still matter!

• The Rand remains under pressure and as volatile as ever. Not only do the ever present fear of further power cuts remain, but South Africa faces other obstacles such as labour disputes, safety issues, skilled manpower and equipment shortages.

• Gold fell 1.6% yesterday on the back of profit taking. Platinum rose 1.9% to $1,786—another high!

 

Monday 4th February 2008 Interbank
GB POUNDS / EURO  1.3302
EURO / GB POUND 0.7518



70% chance that BoE to cut interest rates by 25 basis points this week.

Pounds:

The pound had a poor finish to the week on Friday as it tumbled over 1.5% against the dollar, from $1.9921 to below $1.97, closing at $1.9690. The pound also dropped 0.5% against the Euro to close at 1.3315. The pound suffered losses against a basket of currencies.

This week, the focus will be on the Bank of England interest rate decision which will be announced on Thursday. According to a survey of analysts by Ideaglobal.com, there is a 70% probability that the central bank will cut by a quarter, and a 20% chance of a half-point reduction. If the bank decide to leave rates unchanged, it would seem to be badly received by business and come as a bit disappointment to the markets.

Data at 9.30am: PMI Construction expected at 55.0 from 56.0 previous.


Euros:

The ECB is expected to leave rates unchanged this week at 4.00%. Recent statements by Jean-Claude Trichet have continued to insist that inflation is the ECB’s only concern, but if this continues, the markets may start to discount them.

The Euro had a mixed end to the week, suffering from an improving dollar but gaining from more pressure on sterling. The single currency fell back from trying to squeeze through the $1.49 level to close at $1.4852, but gained 1 per cent from 0.7469 to 0.7575.

Data at 10.00am: Eurozone Producer Price Index expected at 4.3% from 4.1% previous.


General Euro Currency News:

• The Australian central bank are expected to raise interest rates on Tuesday from 6.75% to 7.00%.
According to Australian Treasurer Wayne Swan, the country has a very substantial inflation problem.
His comments are seemed to be softening up the Australian public for a rate hike of 25 basis points.

• Oil prices drifted Monday as gains in global stock markets helped offset worries about a possible US
recession that would stunt oil demand, closing at $89.53 per barrel.

 

Friday 1st February 2008 Interbank
GB POUNDS / EURO  1.3300
EURO / GB POUND 0.7541


Eurozone inflation hits 14 month high.

Pounds:

Poor mortgage approval data for December has kept Sterling under pressure. Fears of a US led recession have forced consumers to reel in their spending and delay big ticket purchases. With three months of sustained house price falls, there will be even more pressure on the Bank of England to cut rates next week and provide some relief for the consumer. It still remains a topic of debate whether a cut in rates from the Bank of England will actually be passed on to UK borrowers as banks continue to draw in their purse-strings in preparation for another series of large write downs later this year.

The pound gained just over 0.8% against the dollar yesterday and is now trading over the $1.99 levels, currently $1.9930.

Data at 9.30am: PMI Manufacturing expected at 52.5 from 52.9 previous.


Euros:

Eurozone inflation has hit a 14 year high, which has helped the central banks stance of its position not to cut interest rates.

The euro has been trading in narrow ranges as of late and seems to be holding firm ahead of the pending US data today. The single currency has been held between a range of $1.4825—$1.4874 and has tried on a few occasions to break through the $1.49 level, but each time it does, it falls straight back.

Data at 10.00am: German PMI Manufacturing expected at 53.6 unchanged from last month.


General Euro Currency News:

• The Rand took a large step towards the 15 level against sterling and broke through 7.50 level against the dollar after interest rates were left on hold at 11%. This on the back of the energy shortages has seen the Rand tumble over 3% against a basket of currencies.

• Oil moved lower yesterday after OPEC said it would maintain production levels. It fell $2.40 per barrel and closed at $91.75.

• Gold rallied slightly with investors looking to the commodity as the usual safe haven, closing at $922.6


 

 

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