US Dollar:
The dollar was knocked back above 1.50 against the euro yesterday, shattering its recent trading range and breaking through technical levels. The Central Banks of Thailand, Singapore, South Korea and the Philippines were suspected of buying U.S dollars in foreign exchange markets to slow the rise of their own currencies. Dollar weakness has recently been attributed to concerns about fiscal policy and the Fed Reserve’s view that interest rates will remain low for some time. While ultraaccommodative U.S monetary policy is likely to fuel further near term gains in risk assets like stocks, keeping pressure on USD against other currencies, not so with sterling this morning, as it took a battering against other majors including the dollar.
Sterling is currently suffering against the dollar in the near term as GBP/USD was down to 1.6529 this morning while EUR/ USD sets a new bar at 1.5070 currently. Trading levels should otherwise be light on this Thanksgiving Holiday. Happy Thanksgiving to our American readers!
Pound:
Sterling is trading considerably lower this morning against the USD and Euro at 1.0966 and 1.6528 respectively. Today would normally be a quiet one in the markets as the US enjoys the “Thanks Giving” bank holiday. However, the big news this morning revolves around Dubai and the banking sector. Dubai shocked investors this morning by asking for a debt standstill (freeze on loan repayments) at Dubai World, the government’s flagship holding company that has developed some of the world’s craziest building projects. During the credit boom pre august 2007, Dubai benefitted from endless credit generating massive economic growth but has been badly hit in recent times. The problem with this new emerging crisis in the middle east is that it’s now a global problem as big bank’s like HSBC in the UK have been large lenders to the region and it’s development projects. An increase in risk over loan defaults could create renewed toxic debt amongst major banks including HSBC causing another crisis in the same way as what has happened to the US.
To reflect this problem HSBC shares were down 1.5% this morning and the bond markets in London were demanding much higher premiums to hold debt from the region. In other news for UK banks in particular, plans unveiled this morning could help see London lose it’s status as the financial centre of the world as our banks could face the toughest regulation on bonuses and with the banking sector being a key part of economic growth this is another reason why sterling is trading dramatically down today.
CBI realized sales (wholesale/retail order volumes) will be released at 11am this morning forecast to be up from 8 to 12, showing an expected increase in consumption.
Euro:
The Euro surged above 1.50 on the dollar as new levels were set for the currency pair. This new trend could be sustained as December is traditionally a seasonally positive month for the single currency and the trading week after Thanksgiving could prove to push on in kind until the end of the year. The Euro made some significant ground on sterling this morning however, as it came to light that Dubai World required a delay on repayment of $80 billion of debt, causing shock on the market and nervous sterling investors. No trading in the U.S should reduce volatility on the markets this morning so the Euro should stay
within its ranges, although eyes will be on the fall out of the Dubai news, as well as M3 money supply, private loans, German Preliminary CPI and other Euro zone data that may affect the Euro today. EUR/USD is currently 1.5070, while GBP/EUR shows sterling under pressure at 1.0960 currently.
Quote of the Day
“If you rest, you rust.” – Helen Hayes