US Dollar:
The Greenback rose for the ninth straight day against the Pound yesterday after weak economic news from the U.K saw the dollar strengthen by 1.4cents in heavy trading. Yesterday’s low of $1.5261 was the lowest level since May 2009. Much of the Dollar movements have been driven by news surrounding the Pound and the Euro as weak U.K data and monetary woes in the Euro Zone make the Dollar more attractive for those who are risk adverse. Oil prices are also important to factor in, lower global demand for oil will lower the price which will in turn lower the demand for dollars as crude oil is priced $ per barrel. This, however, is a fine balance as a weaker dollar (in comparison to other commodity lead currencies such as the Australian Dollar) has seen oil prices supported at around $76 per barrel. This morning sees both the Pound and the Euro up against the ndollar. EUR/USD 1.356 GBP/USD 1.527
Pound:
Sterling fell yesterday by over one percent against the Euro and hit a new nine month low vs the USD as concerns over further QE by the BoE and today’s revised GDP number rattled the market. The pound was also hit by risk aversion yesterday as weaker US jobless claims encouraged investors to head for the safe haven USD and Japanese yen. The UK also received further blows in poor economic data with preliminary business investment data hitting –5.8% against a forecast of 0.2% (for Q4 2009), news that caused extra concern over this morning’s GDP data release. The general tone for UK economic prospects has been downbeat this week with Mervyn King’s comments made on the possibility of further QE also highlighted in a speech delivered by Adam Posen, another MPC member. In more positive news a survey released yesterday lunchtime showed retail sales volumes rose much faster than expected in February although this is only one barometer on the UK economy, with many others showing negative readings. It looks as if sterling will remain weak for some time yet as the BoE continue with a loose monetary policy (further QE/hold interest rates) amongst a weak economy. Expect further falls for sterling especially if GDP is not revised up to 0.2% from the 0.1% preliminary figure released a few weeks ago. I’m off to a 20th century furniture auction tomorrow in hunt of some 60’s classics, Whatever you have planned this weekend, enjoy!
Euro:
The Euro was slightly up on both Sterling and Dollar at market open, however, the Greek Prime minister announced that the worst fears for the Greek economy have come true. This announcement at 09:07 GMT will no doubt cause volatility in the markets. The down beat comments will put heavy downward pressure on the Euro, however some traders may see the silver lining as Greece now must act quickly and decisively in solving their financial problems. In addition to the Prime Minister’s comments, it has also been announced that no other countries will pay for their financial problems, thus quashing a bailout strategy for the immediate future. How the markets will react over the course of the day will be hard to guess but as of 09:13 GMT the Euro is holding firm at $1.357, up 0.2% on the day and level with GBP at EUR/GBP 1.265. U.K GDP figures are due at 09:30GMT which, no doubt, is the major news for the day for market traders.
Quote of the Day
“Each day is a new life. Seize it. Live it.” – David Guy Powers