Pound:
Sterling is pushing up higher against the Euro and USD this morning on the back of positive monetary policy comments by the MPC Bank of England member Andrew Sentence. Mr Sentance said: “The combined impact of low interest rates and quantitative easing should continue to be supportive of economic growth through 2010, though, as the strains in the financial sector begin to ease, the MPC will need to assess whether monetary policy needs to be so supportive and whether there are inflationary risks from such a policy.” These comments have increased expectations amongst the market that QE could be halted in February as the BoE start to move away from providing aid to the economy. Andrew sentence is also known as a hawkish member of the BoE and in favour of interest rate rises. The pound has managed to achieve a five month high against the Euro helped by ongoing concerns with the fiscal health of Greece.
Nationwide is due to release it’s latest house price numbers tomorrow morning at 7am.
US Dollar:
The Dollar was up on the Euro and down on Sterling as risk sentiment contributed in the most part to Dollar buying, although MPC comments in the U.K were enough to boost GBP over the Dollar.
The Dollar found renewed strength over the Euro as Greece and now Portugal’s debt concerns were still weighing on the single currency, while news of a dissent by a Fed member on the recent U.S interest rate decision led to suggestions that the U.S will raise rates sooner than expected. FOMC Member and Kansas City Fed President Thomas Hoenig dissented against the decision, a move that Westpac foreign exchange analyst Robert Rennie believes could set up the Dollar for renewed strength in the near future; “I do think the dissent is important, and obviously does suggest the level of debate within the Fed is rising and set to rise further” he said.”The dissent was a surprise and signals that within the Fed we’re seeing gradual movement towards more normal monetary policy stance,” said Omer Esiner, senior market analyst at Travelex Global Business Payments in Washington. The outcome of the FOMC’s vote, including a “very subtle” upgrade in the Fed’s assessment of the U.S. economy, “could set the tone for a continued dollar strength in coming weeks,” he said.
Whilst the Dollar was up against most of its rivals, it fell back against Sterling, as comments from MPC member Andrew Sentance pointed to a more positive outlook for the U.K economy and possibly a reduction in quantitative easing (money printing). This was enough to give Sterling a solid boost against Greenback and other majors this morning. GBP/USD 1.6257, EUR/USD 1.4034.
Euro:
The Euro was down across the board this morning, losing further ground on Sterling and the Dollar as uncertainty in Europe and news of economic recovery in the U.K and U.S weighed heavily on the single currency again. Investors continued to reduce their holdings in the Euro after concern over nations’ debt in the Euro zone received no rest bite. In addition to lingering concerns about Greece’s ability to repay its expanding debts, currency investors are also nervous about Portugal, which said earlier this week its budget deficit for 2009 was equivalent to 9.3% of gross domestic product, above the 8% ceiling expected by the European Commission. “Keeping a lot of Euro holdings is highly risky because Portugal’s sovereign ratings can be downgraded anytime,” said Yuji Saito, director of the foreign exchange department at Calyon Tokyo.
Investors have recently tended to sell the Euro soon after buying it, making the Euro’s price moves choppy. Suggestions in the U.S that they could raise interest rates sooner than expected, and similar positive sentiment for the economy in the U.K further weakened the single currency against GBP and USD. GBP/EUR 1.1585, EUR/USD 1.4034.
Quote of the Day
“One should count each day a separate life.” – Seneca