Euro Pounds Currency Brief March 2008

 

Monday 31st March 2008 Interbank
GB POUNDS / EURO  1.2580
EURO / GB POUND 0.7949


Sterling hits all time low against euro to fall below 1.26

Pounds:

The pound has seen even more declines against the majors and has seen new record lows against the single currency. We have seen the pound fall below 1.26 against the euro and a 2 cent drop against the dollar, to be trading around $1.9862.

UK house prices have now fallen six months in a row, according to the March housing market survey from Hometrack. Average prices fell 0.2% over the month with the annual rate of growth slipping to +0.4%, the latter being the lowest annual increase in 2 years.

This week we have Purchasing managers index data which is expected to show activity is slowing in the UK’s services and manufacturing sectors as the economy continues to grapple with the global credit crises.

No data today.

Euros:

The euro held in a tight range on Friday against the dollar, trading around the $1.58 levels, near its all time highs as markets look towards important date from the US. Against the pound the euro has hit a new record high 0.7944, with the key level of 0.80 in sight.

In a busy week for European data, the flash estimate for euro-zone inflation in March, due today, is expected to be unchanged from February’s record high 3.3%, suggesting the European Central Bank will keep interest rates the same.

Data at 9.00am: Euro Zone Consumer Confidence expected at –12 unchanged, Economic Confidence expected at 100.00 from 100.1 previous and Consumer Price index.

General Euro Currency News:

• Oil prices are below the $105 a barrel on Monday amid continuing concern that energy demand would be affected by a slowing US economy. Current price is $104.56 per barrel.

• Spot gold is down $3.60 at $927.30 per troy ounce and could see more profit taking following Friday’s sell off. Important data from the US this week will give us a clearer indication of how low gold may drop.

 

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Thursday 27th March 2008 Interbank
GB POUNDS / EURO  1.2750
EURO / GB POUND 0.7843


Sterling battered on back of BoE Governor's comments.

Pounds:

Sterling had another bad day yesterday against both the euro and the dollar as comments by the Bank of England’s governor ‘Mervyn King’ were met with the pound being sold off.

The Governor paved the way for it to take more radical steps to ease mounting financial stresses on British banks as he admitted that the credit squeeze had entered a new and difficult phase. The bank has signalled it is ready to cut interest rates further, maybe as soon as next month.

The Bank of England has faced criticism from British banks for not being prepared to act as aggressively as the European Central Bank or the US Federal reserve to ease liquidity strains.

Data at 9.30: BBA Loans for House Purchase, At 12.00 we have CBI Distributive Trades Report.

Euros:

The euro was the overall winner again yesterday as we saw the single currency pick up over 1 cent against the dollar and a storming 1.75 cents against the pound. This was on the back of better than expected German Ifo data, weak US data and comments from the Bank of England.

The Ifo data showed that German business confidence picked up again in March, despite a stronger euro and high oil prices. The consensus was for a figure of 103.4 but the actual figure came out at 104.8, showing that the German economy has gained strength from the beginning of the year.

No data today.

General Euro Currency News:

• Iceland’s central bank raised interest rates to 15% in an emergency move to halt the collapse of the krona which has fallen 18% since mid-March.

• Oil gained more than $4 as lower US fuel inventories and the further depreciation of the US dollar spurred buying.

• Spot gold is up 30 cents at $954.30 a troy ounce after its rally overnight on increased risk aversion associated with US housing credit woes.

 

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Wednesday 26th March 2008 Interbank
GB POUNDS / EURO  1.2843
EURO / GB POUND 0.7786


Euro slightly down against sterling.

Pounds:

The pound has made good ground against the dollar since yesterday morning with a 2 cent gain after the weak

US data was released, to hit $2.0067. The pound also faired well against the euro with half a cent gain against the single currency.

Today the BOE governor ‘Mervyn King’ will testify at the TSC committee over the policy chasm that has opened up between Britain and the US in their response to the credit crises. This may be worthwhile keeping an eye on as he may elaborate over his meetings with senior UK banking executives last week over the weekend.

No data today.

Euros:

The euro is very slightly lower against the dollar and the pound this morning. The single currency did climb above $1.56 against the dollar yesterday after the consumer confidence report and remained around that level throughout yesterdays session.

Today markets are turning their attention into the German Ifo business sentiment index, forecast to be 98.2.

Against the pound the euro has given up some of its gains it made yesterday with nearly half a cent loss to sterling, from 1.28.00 to 1.2841.

Data at 8.45am: French Consumer Confidence.
At 9.00am Italian Business Confidence.
At 10.00am we have German Ifo. Speaker at 10.30am—ECB’s Trichet.

General Euro Currency News:

• Oil prices have risen today as the depreciation of the US dollar drove investors to crude futures despite new economic worries and expectations that US stockpiles were continuing to build.

• Spot gold is up 30 cents at $938.80 a troy ounce, breaking through the resistance level of $935.00, setting up a possible run to $960.00.
 

 

 

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Tuesday 25th March 2008 Interbank
GB POUNDS / EURO  1.2816
EURO / GB POUND 0.7803


Euro-zone economy continues to slow in March.

Pounds:

Sterling has made back its losses from the weekend against the dollar and since opening this morning, has made 1 cent against the greenback.In Asian trade, the pound did drop against the euro by over 1 cent, but has since levelled off.

Reports over the weekend have suggested that the Bank of England is considering participating in a “mass purchase” of troubled mortgage-backed securities by the World’s central banks and has given a tacit nod to a reform of the way it helps the big banking groups with emergency funding. It seems the banks Governor ‘Mervyn King is sympathetic to a request by Britain's big five banks to introduce a system of funding similar to that used by the Federal Reserve in the US.

No data today.

Euros:

The euro suffered against the greenback over the long weekend as the dollar had a good weekend. However, the euro has since fought back this morning and made up any losses to be close to where it finished trading on Thursday.

The euro has withstood dollar positive news and more details of the purchase of Bear Stearns but the currency did not retest the 2-week low set overnight around $1.5340. Investors may take advantage of the weaker than expected euro and buy it as it had been trading around $1.5625 just prior to the holiday.

On Thursday we saw the euro-zone economy continue to slow in March fell to 51.9, from 52.8 a month earlier.

This morning the head of Germany’s Ifo economic research has said that it’s too early for the ECB to react to the financial market turmoil

General Euro Currency News:

• Spot gold is up $8.30 at $922.70 per troy ounce as the rebound in the euro and the pound against the dollar encourages bargain hunters.

• Oil prices continued to ease on concerns about weaker US energy demand and the dollar rebound from sharp recent declines. Current price is $100.27 per barrel.

• J.P.Morgan Chase & Co has increased the bid for Bear Stearns from $2 per share to $10 per share

 

 

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Thursday 20th March 2008 Interbank
GB POUNDS / EURO  1.2851
EURO / GB POUND 0.7833


Sterling in a freefall as credit fears hit major UK banks.

Pounds:

Sterling was smashed yesterday as credit fears stemming from UK banks sent the pound on a freefall against the euro and dollar.

The minutes were also released by the MPC which indicated 7 people voted to leave rates unchanged, and 2 voted for a rate cut. This may have brought a potential rate cut closer, most probably in April rather than May.

Rumours of liquidity problems with two main UK banks started circulating in Asia before UK markets opened, but then reached the city around 9.00am. This started to weaken the pound as momentum continued throughout the day. The Bank of England released a statement saying HBOS had not approached them for the lending of funds.

Sterling lost over 1.5 cents against the euro and over 3 cents against the dollar.

Data at 9.30am: Retail Sales expected at –0.2% from 0.8% previous.

Euros:

The euro had a mixed day yesterday as it lost ground against the dollar but hit all time highs against the pound. The single currency lost over a cent against the greenback and hit a new record of 0.7890 against the pound.

This morning we have had German Producer Prices released which have shown they accelerated faster than expected. A figure of 0.3% on the month was forecast but the figure came out at 0.7% which was mainly due to higher energy costs.

No data today.

General Euro Currency News:

• HBOS shares nosedived yesterday by over 20% as rumours hit the city of a liquidity crises. The Bank of England released a statement saying that HBOS had NOT come to them asking for a lending facility.
The FSA are now investigating the share dealing in HBOS and other banks as a result.

• Gold dropped $9.90 yesterday to close at $933.00 as the base metal was hurt by the stronger dollar.

• Oil prices extended their losses as data showed demand for petroleum products is waning in the face of record high prices, closing at $101.98.

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Wednesday 19th March 2008 Interbank
GB POUNDS / EURO  1.2746
EURO / GB POUND 0.7845


UK CPI rose at its fastest annual pace since May 2007.

Pounds:

The pound rallied against the dollar and euro yesterday, but started to drop after the fed decision yesterday evening. We saw a gain of nearly 2 cents against cable and 1.5 cents against the single currency.

Data released yesterday showed soaring household energy bills sparked another sharp jump in inflation last month, worsening the Bank of England’s quandary over how to respond to conflicting pressures from rising price pressures and faltering growth.

A massive 10.5% jump in the cost of gas and electricity pushed by utilities groups lifted overall consumer prices by 0.7%, driving their annual pace of increase to a nine-month high of 2.5%, far above the Bank’s 2.0% target.

Amid continuing hopes that the Bank’s Monetary Policy Committee will cut interest rates again either next month or in April, there was some reassurance for the MPC as yesterday’s anticipated surge was smaller than expected.

Data at 9.30am@ Bank of England Minutes, Claimant Count Rate, Jobless Claims, ILO Unemployment Rate.

Euros:

The euro made steady progress against the dollar yesterday in the run up to the Fed’s rate decision at 6.15pm. As expected, the rate cut weakened the single currency’s position against the greenback but it has started to come back again this morning.

Against the pound, the euro traded around 0.7880 but has since given up some of its gains to be trading around 0.7812.

Data at 10.00am: E/Zone Trade Balance expected at –7.0B from –4.2B previous

General Euro Currency News:

• Lehman Brothers Holdings is unlikely to face the kind of liquidity crises that brought down Bear Stearns over the weekend because of the Federal reserve’s decision to let Wall Street Brokerage firms borrow directly from the central bank.

• Oil prices fell by $1.06 to $108.36 a barrel, with more volatility expected.

• Gold was sold off before the Fed’s rate meeting yesterday, but has gained back $6 to trade at $987.30 per troy ounce.

• The Aussie dollar gained yesterday as minutes from the RBA meeting indicated more rate increases.
 

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Tuesday 18th March 2008 Interbank
GB POUNDS / EURO  1.2712
EURO / GB POUND 0.7866


British banks swamp the Bank of England to take advantage of £5b lending injection.

Pounds:

The pound has continued to be under pressure against the euro and fallen even more against the dollar. We have seen over 1 cent drop against the greenback and 55 pips against the euro respectively.

The Bank of England has been swamped by British Banks wanting to take a slice of the GBP5 billion put up by the central bank to help increase liquidity flows. It has been suggested as much as GBP23 billion has been requested. As a result, the banks took a major hit yesterday, and the consensus is the longer interest rates remain as high as they are in the UK, the harder  the economy will be hit later on and as a result investors are piling out of UK assets faster than you can say recession.

Data at 9.30am: CPI expected at 2.5% from 2.2% and Core CPI expected at 1.4% from 1.3% previous.

Euros:

The euro continued to remain strong against the pound but did fall slightly against the dollar after hitting its all time highs against the greenback.

The $1.59 level was hit, but then dropped back to $1.5729 as the dollar rallied. ECB member Juergen Stark said that euro-zone inflation will remain clearly above 2% this year. He said while exchange rates should reflect economic fundamentals and high volatility isn’t helpful for growth, it isn’t correct to only look at the dollar.

ECB’s Mersch speaks at 5.00pm.

General Euro Currency News:

• The dollar fell to an almost 13 year low against the yen yesterday. A weak US dollar hurts big Japanese exporters by driving down the value of their overseas earnings in yen, and leading them to raise prices abroad to compensate.

• Oil dropped more than $4 a barrel yesterday amid concerns that the financial crises that forced the sale of Bear Stearns is a sign of deep economic trouble in the US.
 

 

 

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Monday 17th March 2008 Interbank
GB POUNDS / EURO  1.2769
EURO / GB POUND 0.7831


Oil jumps to all time high to set new record of $111.42.

Pounds:

The pound has hit new lows against the euro after breaking below the 1.27 level. This was after better than expected economic data from the euro-zone and a knock on effect of the weakening dollar.

Cable doesn’t seem to have benefited at all, considering the movements of the dollar on other currencies. If anything, the dollar is up, heightening the fact that sterling seems to still be on a downward spiral.

This week, data centres on inflation with CPI Index released and the Bank of England Minutes due on Wednesday, which will give further clues on the path of interest rates.

No data today.
 

Euros:

The euro has stormed to an all time high against the dollar to hit $1.5901 this morning. Since Friday, the single currency has continued to benefit on the back of the dollars collapse and see’s no signs of stalling.

Data out on Friday also seemed to dampen chances of a rate cut in the euro-zone as stronger than expected CPI figures came out at 3.3% for the year, from an expected 3.2%. Higher food and energy prices pushed up the annual measure and strengthened the single currency. The euro also saw new record breaking levels set against the pound to hit 0.7910.

Data at 10.00am: Euro-zone Employment.

General Euro Currency News:

• JP Morgan Chase agreed on Sunday to buy Bear Stearns, the stricken US investment bank, for about $236m in shares in a deal that puts an end to Bears 85 years of independence.

• The Japanese Yen has continued to strengthen on the back of the dollars demise as Y97.00 has been breached.

• Oil jumped to an all time high of $111.42 on the back of the downward trend of the US dollar.

• Gold hits record high of $1,032.35

 

 

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Friday 14th March 2008 Interbank
GB POUNDS / EURO  1.3028
EURO / GB POUND 0.7675


Gold breaks through $1000.00 per troy ounce.

Pounds:

The pound stayed in tight ranges yesterday as it continued to look strong against an ever decreasing dollar but remained weak against the buoyant euro.

Yesterday’s BoE inflation report weighed heavily on the pound as expectations of inflation, a crucial issue for the rate-setting Monetary Policy Committee, continued to reach new records last month. The MPC fears that recent steep increases in food and fuel prices will lead individuals and companies to expect higher inflation which will stoke up wage demands and encourage companies to raise prices, making this strengthening in inflationary pressure a self-fulfilling prophecy.

No data today.
 

Euros:

Another record breaking day for the euro as it broke above $1.56 against the dollar yesterday. Poor data from the US helped the single currency break new highs as the relentless march of the euro continues.

Against the pound, the euro gained about 20 pips from the previous days session and the euro looks to finish the week breaking new highs against a few majors.

This morning we have seen German Consumer Price Index figures come in line with expectations at a rise of 0.5%. Food and energy have been among the largest contributors to push inflation up.

Data at 10.00am: Eurozone CPI MoM expected at 0.3% from –0.4% previous.

General Euro Currency News:

• Gold broke through the key $1,000.00 level yesterday as the precious metal hit an all time high. Panicking investors snapped up gold amid escalating fears of the global credit crises.

• The $22 billon investment Fund ‘Carlyle Capital’ which collapsed has prompted Fed member Henry
Paulson’ to urge Wall Street banks to shore up their finance.

• Shares in Bear Stearns continued their sharp decline as investors grew worried about the banks exposure to Carlyle Capital and other troubled investment funds.

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Thursday 13th March 2008 Interbank
GB POUNDS / EURO  1.3054
EURO / GB POUND 0.7660


Dollar continues it’s slump against a basket of currencies.

Pounds:

The pound seemed to take a backseat again yesterday as the markets digested the dollar move, and we saw cable gain a cent to hit $2.0260. The move has continued this morning as we have seen $2.03 breached and it seems the trend may continue this week.

Alistair Darling’s first budget didn’t really produce too much movement for the pound, but his footling incentives did seem to be a sideshow. There is one overwhelming change facing the business world and its not going to be addressed by £10mil more for science teachers or £12mil for women entrepreneurs. Western Capitalism is bluntly, being haunted by the spectre of a catastrophic domino-like collapse of financial institutions, although Mr Darling did at least acknowledge that a number of credit markets were “barely functioning”.

Data at 9.30am: BoE’s Inflation Attitudes Survey.
 

Euros:

The euro was testing all time highs against the dollar again yesterday, and was just 11 pips off hitting the $1.56 level this morning. The single currency benefited from the dollar giving up its hard earned gains after Tuesday’s Fed injection of $200bn available to banks, and better than expected economic data from the eurozone also buoyed the single currency.

Industrial Production in the 15 countries that share the single currency beat forecast in January, showing strength despite slowing global growth and the strength of the euro. Industrial output rose 0.9% on the month and 3.8% on the year, well ahead of the forecast of 0.4%/month and 2.6%/year. According to Jonathan Loynes, chief European economist at Capital Economics in London, “Despite a perceived softening of the ECB’s attitude toward the euro in the last few days and despite complaints of some European politicians, we don’t expect the ECB to intervene”.

Data at 10.00: European Central Bank Publishes Monthly report.

General Euro Currency News:

• The Japanese Yen broke through the key Y100 level this morning as the strength of the Yen continues
to worry the central bank if Japan.

• The Swiss central bank is expected to leave interest rates unchanged for the sixth straight month

• Oil prices continue to climb as we are back near the $110 per barrel. In Asian trade it hit $109.92.
 

 

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Wednesday 12th March 2008 Interbank
GB POUNDS / EURO  1.3077
EURO / GB POUND 0.7647


Budget due in UK after Prime Ministers question time at 12.30

Pounds:

The pound was caught up in the rollercoaster ride led by the dollar yesterday, as it initially gained just under
1 % against the greenback, but then gave up its position and then some after the Fed’s liquidity boost in afternoon trade, dropping from $2.0211 to $2.0012. Against the euro, the pound dropped 50 pips after strong euro data was released at 10.00am, but then made its losses back in afternoon trade to close around 1.3070.

Looking ahead to today, we have the Budget with Alistair Darling making his first appearance as Chancellor. This will start just after Prime Ministers question time which is at 12.30.

Data at 9.30am: Visible Trade Balance & Total trade Balance.
 

Euros:

The euro gained initially yesterday after the latest ZEW survey from Germany showed that economic expectations had improved unexpectedly. The index came in at –32.0, up from -239.5, when the market was expecting a small decline to –40.0. The single currency was also boosted by higher than expected euro-zone inflationary pressures, which, according to ECB member Axel Weber thinks will leave no room to relax monetary policy., giving no leeway for lower interest rates. This boosted the euro and rallied the single currency to just under 1% against the dollar. But then, the Fed made its move and the euro plummeted over 1% back down against the greenback. This morning, the euro has started where it begun yesterday at $1.5360.

Data at 10.00am: Euro-zone Industrial Production expected at 0.4% from –0.2% previous.

General Euro Currency News:

• Oil prices are slightly lower, but holding above $108 after rising to a record near $110 overnight amid forecast that strong global demand will keep prices high. The strengthening US dollar also weighed in on the price of oil.

• The Yen lost some of its gains yesterday after the dollar rally, easing back from the Y101.00 level.
 

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Tuesday 11th March 2008 Interbank
GB POUNDS / EURO  1.3077
EURO / GB POUND 0.7647


RICS housing data in UK shows sentiment at lowest point since 1990.

Pounds:

Data released this morning by the Royal Institution of Chartered Surveyors showed sentiment in the UK housing market is at its weakest since 1990, when property prices were in a protracted slump.

Sterling has fallen just under 1 cent against the dollar and around 70 pips (0.7%) against the euro. Data released also showed that UK GDP growth accelerated slightly to 0.5% in the three months ending in February after 0.4% in the three months to January, although trend growth is generally reckoned to be around 0.6% - 0.7% per quarter.

This period of below average growth will be welcomed by the central Bank but it does not suggest that the economy has slowed sufficiently sharply for the Bank of England to make further interest rate cuts a priority.

The bank is known to be concerned about inflationary risks and it obviously also understands that growth rate is not a major concern simply because it is below average.

Data at 3.30pm: Leading Indicator Index & Coincident Indicator Index.

Euros:

Support for the euro against the dollar is seen around $1.5350, with the dollar making back some small gains against the single currency.

Today’s focus will be on the German ZEW Survey which is due at 10.00am. Economist polled by Dow Jones forecast the ZEW business expectations index to fall to –40.0 from February’s –39.5.

The recent appreciation of the euro against the dollar and the rise in oil prices is likely to contribute to a renewed deterioration of business expectations, economists said.

Data at 10.00am: German ZEW Current Situation expected at 30.0 from 33.7, Economic Sentiment expected at –40.0 from –39.5 previous. Euro-zone ZEW Survey expected at –42.0 from –41.4 previous.

General Euro Currency News:

• Oil prices are little changed Tuesday, holding above $107 a barrel, after rising to a new record in the previous session as the US dollar weakened further. Spot price $107.69.

• Spot gold is down $1.25 at $975.25, despite oil prices holding close to record highs and the dollars continued decline. The weak turn in gold may reinforce sentiment that gold is toppish and due for a correction.
 

 

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Monday 10th March 2008 Interbank
GB POUNDS / EURO  1.3145
EURO / GB POUND 0.7607


Sterling makes big gains against EUR and USD.

Pounds:

Sterling led the rally against the US Dollar on Friday moving quickly through the $2 level and moving as high as 2.0217 briefly. Having dropped to 1.29 against the Euro the Pound recovered to a high of 1.3150 before settling at 1.3120.

Alistair Darling's first budget statement provides the highlight for the UK economic calendar this week, but economists say he will have little room to introduce fiscal measures to stimulate growth.

Figures out today: 0930 UK PPI / Industrial & Manufacturing production

Euros:

On Friday, the dollar staged a slight recovery against the euro and yen, after dropping to record lows on the poor U.S. labour data. The euro rose as high as $1.5465 on the jobs data, and has yet to plateau, say currency analysts, after a two-week rally marked by successive historic highs.

This week, a survey by the Centre for European Economic Research, or ZEW, is expected Tuesday to show more nervous sentiment among German financial analysts and institutional investors in March as fears of a U.S. recession increase. economists surveyed by Dow Jones said.

Figures out today: 0800 German Trade balance / 0845 French Industrial Production / 1030 EA Sentix Investor
Confidence.

General Euro Currency News:

• Oil is falling back in early trading but still well over $100 USD

• Spot Gold is trading around $975 and within easy striking distance of $1000 USD an ounce

• In politics, Spain's Socialist leader Zapatero heads into a second term with a mandate to engineer a soft landing for a nation that has fuelled European economic growth for a decade.

 

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Thursday 6th March 2008 Interbank
GB POUNDS / EURO  1.3016
EURO / GB POUND 0.7682


Sterling dollar heading back towards the $2.00 level.

Pounds:

Sterling benefited from a continuing weak dollar yesterday as cable tried to test the $2.00 level again. The pound gained nearly 2 cents against the greenback, but fell against the euro, getting forever dangerously close to the €1.30 level.

Figures yesterday showed that prices in the British service sector rose to a record high in February. Activity in the sector rose for a third consecutive month from 52.5 in January to a five month high of 54 in February.

Looking towards today, The Bank of England should keep rates on hold to quell persistent inflationary pressures, despite mounting evidence that an economic slowdown is taking hold, according to the Times MPC.
Data at 12.00:

Bank of England rate Decision expected to remain unchanged at 5.25%

Euros:

The euro had another good day against the dollar yesterday, sustained by weak US data and anticipated support from the European Central Bank.

The euro rose to $1.5305 before dropping back to $1.5285. The markets are expecting ECB President—Jean Claude Trichet to express little concern about the weakening dollar in his statement after the ECB monetary policy meeting later today.

Against sterling the euro rose to 0.7682, another record high for the single currency. Looking forward, the ECB is expected to leave its refinancing rate on hold at 4.0%, with the markets closely monitoring the press conference straight after the rate decision, for any change in rhetoric from Jean-Claude Trichet on their tough anti-inflation stance.

Data at 12.45: European Central Bank Rate Decision expected to be unchanged at 4.0%

General Euro Currency News:

• Reserve Bank of New Zealand Governor Alan Bollard said the official cash rate will remain at 8.25%, one of the highest in the developed world, because of inflationary pressures.

• Bank of Japan expected to keep interest rates unchanged at 0.50%

• Oil prices jumped $5 per barrel yesterday to hit $104.42. This was caused by a drop in US crude oil
supplies.

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Wednesday 5th March 2008 Interbank
GB POUNDS / EURO  1.3078
EURO / GB POUND 0.7678


Consumer confidence in UK reaches an all time low in February.

Pounds:

The pound’s decline continued early this morning as more economic data weighed heavily on sterling.

Economic data showed consumer confidence in the UK reached a new all time low in February as rising food and fuel costs and tighter borrowing conditions continued to take their toll, according to the Nationwide Building Society. It’s index fell to 78, the lowest level since the survey began. Also, the latest poll from the CBI said service sector firms were gloomier than at any time since November 2001. Evidence that the UK service sector , which accounts for 74% of gross domestic product, is set to slow sharply, will increase the chance of further interest rate cuts from the BoE’s Monetary Policy Committee, but economists surveyed by Dow Jones expect them to leave the key rate unchanged at 5.25% tomorrow.

Data at 9.30am: PMI Services expected at 52.0 from 52.5 previous

Euros:

The euro is under slight pressure against the dollar and yen, but in very narrow ranges, pending economic data from the US from Wednesday onwards, with Euro-Dollar expecting to be in between $1.5160—$1.5220.
yesterday, comments by European officials upset over what they see as an over inflated euro put the kibosh on a rally in the single currency, ending its five day rally against the dollar.

According to Dustin Reid, currency strategist at ABN AMRO Bank, we are unsure if complaints by euro zone officials will be enough to turn the tide on overall dollar weakness. Some verbal intervention might slow the euros' rise at least at the outset until the market does not take the comments seriously any more.

Data at 8.55 German PMI Service expected at 51.0 from 49.2 previous, Euro-Zone Retail Sales expected at 0.3% from –0.1% previous.

General Euro Currency News:

• The markets were expecting a 25 basis point cut by the Bank of Canada, but were taken by surprise with an aggressive 50 basis point cut, taking the key interest rate to 3.50%.

• Oil gained this morning to rise 19 cents to hit $99.71 per barrel after dropping yesterday on comments
that the oil cartel will boost production to bring prices down.
 

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Tuesday 4th March 2008 Interbank
GB POUNDS / EURO  1.3078
EURO / GB POUND 0.7643


Record rise in factory gate prices in UK fuels Bank’s fears for inflation.

Pounds:

The Bank of England’s concerns over price pressures were fuelled yesterday as a key indicator of the price of goods leaving factories showed the British manufacturers had increased prices at a record rate last month.

The index rose to 59.9 last month, the highest since figures were first collected in 1999. Any figure above 50 indicates increasing pricing pressures. This data will undoubtedly highlight the central banks concerns over inflation, and thus confound the market view that they will leave interest rates on hold later this week.

No data today.

Euros:

What a day for the euro! The single currency was on a charge against the greenback and hit an all time high against the dollar to touch $1.5276, and against sterling the euro rose to 0.7557. But then speakers from the ECB, including Jean-Claude Trichet, President of the central bank, fired some warning shots across the bows of foreign exchange markets, as their relentless assault on the dollar continues to drive the euro to these records highs , which is threatening the eurozone growth.

Rising European unease over the euros' gains was emphasised by Jean-Claude Juncker, chairman of the Eurogroup. He said after yesterdays meeting, “I am starting to become increasingly concerned and vigilant”.

More comments which seemed to show not everyone in the eurozone is happy with the state of the euro were highlighted by the IMF’s managing director Dominique Stauss-Kahn, who seemed to blame ECB neglect of growth prospects and determination to focus on fighting inflation for the euros' strength.

Data at 10.00am: PPI expected at 0.8% from 0.1% previous, GDP expected at 0.4% unchanged.

General Euro Currency News:

• The Reserve Bank of Australia raised its official cash rate by 25 basis points to 7.25%, as inflation is at it’s highest point in 17 years.

• Oil prices are holding firm above $102 a barrel after hitting an all time high of $104.00. Investors are getting into commodities to find a safe haven and a hedge against inflation. Oil now $102.39/barrel.

• Bank of Canada to post rate decision at 2.00pm, expected to cut by 25 basis points to 3.75%.

 

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Monday 3rd March 2008 Interbank
GB POUNDS / EURO  1.3057
EURO / GB POUND 0.7658


UK “Shadow “ MPC votes 7-2 to keep rates on hold BoE decision Thurs.

Pounds:

The Bank of England’s Monetary Policy Committee is expected to leave interest rates on hold this week, while manufacturing and services sector purchasing managers index data are likely to paint a mixed picture, economists said. The “shadow” monetary policy committee has voted 7-2 to keep bank rates on hold at 5.25% this month.

A report in the Sunday Times said despite a 0.5% drop in house prices and evidence from the CBI that February was a struggle for retailers, this does not seem like a month when the Bank of England’s MPC should or will cut interest rates.

The thinking is of May for the next one.

Data at 9.30am: PMI Manufacturing expected at 51.0 from 50.6 previous.

Euros:

The euro gave up some of its gains against the dollar on Friday, but is expected to have another strong week against the greenback.

The ECB is expected to leave its key refinancing rate on hold at 4.00% at Thursday’s meeting and as usual, economists said they would pay close attention to the central bank’s press conference, at which it will outline the latest forecasts from its staff.

The euro has dropped slightly against the dollar and yen, but is still strong against sterling.

Data at 8.55am: German PMI Manufacturing expected at 54.0 from 54.4 previous.

General Euro Currency News:

• The Yen was a major gainer as carry trade were unwound due to uncertainty in the financial markets.
The Japanese currency is at its strongest level against sterling in nearly two years.

• This week there are no fewer than six major central banks holding interest rate decision’s starting with the Reserve Bank of Australia on Tuesday.

• Fears of a hedge fund meltdown are rippling through the City, with dozens more funds said to be close to following Peloton into collapse., according to a report in the Sunday Times.