US Dollar:
After poor news from the BoE, the Dollar surged against the pound, at one point the Dollar was up 0.59% on the day. However, much of these gains were erased and by the close of play the Dollar was only marginally up on the pound.
This morning sees the Dollar down on the pound as the market bets that the Federal Reserve will hold interest rates where they are in an announcement at 15:00GMT. “The Fed’s action last week won’t lead to immediate rate increases,” said Tetsuya Inoue, chief researcher in Tokyo for financial markets and technology studies at Nomura Research Institute. “The employment situation limits the possibility for rate hikes” and that saps demand for the Dollar. This same market sentiment sees the Euro up on the Dollar for the first time in three days. The Dollar weakened to $1.3540 per euro as of 7:18 a.m. in London from $1.3507 in New York yesterday, when it jumped 0.7 percent. The U.S. currency has risen 2.4 percent versus the euro since Jan. 31, heading for a third monthly gain, its longest stretch since November 2008.
Pound:
Sterling had a bumpy ride in the currency markets yesterday, falling nearly a cent against the Euro in the morning and well over a cent against the USD whilst Mervyn King released downbeat inflation report hearings to parliament’s treasury committee, before recovering in the afternoon. The most relevant words that the market picked up on from the governor surrounded the QE “door” which has been left widely open whilst the Bank of England access the outlook for the UK economy in coming months. King said “the central bank’s view of a gradual recovery remained to the downside and if needed, the central bank could re-start its asset buying programme which was paused earlier this month”. The market will be looking for further clues on the central’s bank monetary policy stance when Adam Posen participates in a panel discussion about unwinding quantitative easing at a bond investors conference in London this morning.
Sterling remains vulnerable in the coming months amongst politic and economic uncertainty but has been helped by a weaker Euro in the short term.
Euro:
What is now becoming a regular feature in foreign exchange news, the problems surrounding Greece continue to dominate the headlines. However, this morning sees the Euro edge slightly higher against the Dollar, up 0.25% at 08:48GMT. Whilst this ends a three day running loss against the Dollar, the bigger picture still reveals the Euro down against the Dollar, currently trading at 1.353 compared to 1.433 at the beginning of the year. Much talk has focused on the possibility of a bailout, which in recent days has helped support the Euro, however, an announcement from a German law maker this morning said that state aid for Greece is legally impossible. Whilst this story is in its infancy, should it gain momentum then we could see the Euro take a dive.
In further bad news for the Euro Zone, ratings agency Fitch downgraded four major Greek banks from BBB+ to BBB. So far this negative sentiment has seen the Euro fall 0.1% against Sterling in morning trading.
Quote of the Day
“The self is not something that one finds. It is something that one creates.” – Thomas Szasz