US Dollar:
USD continues on the front foot against the majors including Euro and Sterling as traders give the U.S currency the edge in coming sessions heading into 2010. Expectations of U.S interest rates and a relatively poor economic climate in Europe have all boosted the Dollar, as well as investors closing out their riskier positions in favour of the Dollar for the year end. In a thinly traded market however, some analysts warn against reading too much into recent Dollar strength. “The strength we’ve seen in the U.S Dollar could potentially spill over into the very early part of 2010, driven by the momentum of this rally, but we don’t think this is the beginning of a turnaround unless the Dollar rally can solidify itself into the new year” said Matthew Strauss, currency strategist at RBC Capital in Toronto. The MPC minutes released this morning have done little to improve Sterling against the Dollar as we see USD still making short term gains against the UK currency. GBP/USD 1.5938, EUR/USD 1.4247.
Pound:
The pound continued to trade lower against the Euro this morning after yesterday’s initial fall back into 1.12. Sterling is also to a bigger extent trading lower against the USD into1.59. Recent news out at 9.30am has been mixed with BBA mortgage approval data (number of new mortgages approved) fractionally better at 44.7K against 43.3K forecast. The more important data of the morning surrounding the BoE minutes has done little to move sterling either way indicating that all nine MPC members voted for no change in interest rates and to keep QE at £200bn. More importantly there has been no significant information by our central bank on when it is looking to stop pumping money into our economy leaving the market in suspense and sterling prevented from making any gains.
There are continued expectations by some market participants for the QE programme to be extended further in February as 2010 gains momentum. In more general news global strategist Brian Coulton of ratings agency Fitch’s said that unless the UK (and France) took serious steps to deal with their burgeoning fiscal deficits, they could no longer rely on their top AAA rating for much longer. If we were to lose this rating this would create yet another reason for investors to be deterred from putting money into the UK, adding pressure on the government to sort matters out. There is no further UK data out before Christmas but I will still be reporting the latest tomorrow morning before finishing around lunchtime to buy those last minute presents! But don’t worry we will be open for business again on 29th December, have a good one.
Euro:
The Euro lost more ground against the Dollar, hitting a three-month low after ratings agency Moody’s downgraded Greece’s debt rating by one more notch – a reminder that several euro zone countries face challenging fiscal conditions. All eyes are on MPC minutes in the UK this morning to see if official’s rhetoric suggests further Quantitative Easing is required in the U.K. The signs are that there is little change on the markets as a result of these minutes and Sterling is still on the back foot against the single currency, held back from further weakness by problems in the euro zone and the poor performance of the single currency itself of late. GBP/EUR 1.1185, EUR/USD 1.4247 currently.
Daves Highway performs “Jesus Messiah” by Chris Tomlin
Quote of the Day
I wish we could put up some of the Christmas spirit in jars and open a jar of it every month. ~Harlan Miller