US Dollar news:
The dollar is likely to be relatively quiet as it is a public holiday in the states, thus equity markets are shut all day. However, looking at the markets the dollar is edging higher against both the euro and Sterling,
Sterling has maintained the $1.5160 levels despite being -0.15% down as we start the week. The euro has marched ahead against the dollar, testing those who have shorted the single currency. A range of $1.19 to $1.23 was predicted, however recent improved market sentiment has seen the euro climb to $1.2538 on the market.
Interest rates are a key driving force for exchange rates and unfortunately the global slowdown suggests the Fed will hold its benchmark rate between zero and 0.25 percent through its April 2011 meeting. Futures contracts show a 34 percent chance rates will stay low, up from 12 percent odds a month earlier. This is not what the markets were looking for from America and is viewed as a warning shot for the global recovery. After heavy falls towards the end of the week the commodity lead currencies are reversing losses this morning, however gains thus far are very slight.
The Canadian Dollar is 0.09% up on the day but still languishing in the low $0.94 area at $0.9415. No macroeconomic data for today from the U.S so trading is likely to be quiet if not driven by events elsewhere
Pound news:
Sterling received a boost on Friday from weaker U.S data as investors did not take kindly to poor U.S employment data. As such Sterling pushed on to $1.5230, the strongest levels since May. Sterling has dropped lower this morning, down -0.19% at $1.51722. However, investors will be pleased to see Sterling pushing above $1.50 having been below that level for some time. 09:30 sees services PMI, a positive number here coupled with no action in the U.S markets should hopefully see Sterling test $1.52. At the moment Sterling has 34pips to climb before reaching $1.52, $1.5166 your current price to buy on the market.
Against the euro Sterling appears to be trading either side of €1.2100 for the time being. This is a slight move back from the previous week’s highs of €1.2385 and is a continuation of a steady slide lower from last week. GBP/EUR trading is relatively calm today, the market registering no change for the day’s trading. Sterling opens this morning in the red against the majority of its traded pairs, however, losses have been stemmed to less than half a percent.
Against the Australian dollar the Pound is jumping either side of AUD$1.80 but a look at the highs and lows of the day reveals a move of just under 2 cents for trading so far. Apart from the services PMI data there is little else to come from the U.K for today.
Euro news:
The euro is on the back foot as we start the week as the global slowdown has speculators betting that the central bank will keep rates at an all time low for the foreseeable future. Such is the fragile nature of the recovery that many investors and traders are starting to get bored with the possibility of a rate hike when the reality is a continuing loose monetary policy. Having said this, the euro has maintained a stronger than expected stance in the FX markets, trading in the $1.25 region from lower levels last week. The outlook still remains bearish on the euro; “The ECB will be forced into a lower-for-longer stance on its monetary policy,” said Sue Trinh, a senior currency strategist in Hong Kong at Royal Bank of Canada. “We are still very bearish on the euro and expect a move towards $1.15 by the end of the year.”
The emphasis is now on austerity measures as reducing budget deficits becomes the priority. Getting this right will be a very fine balancing act as any hint of lack of room for growth in the euro zone will see investors move away from the single currency. “There are lingering worries that austerity measures will harm European growth,” said Lee Wai Tuck, a currency strategist at Forecast Pte in Singapore. “We’re still looking to sell the euro on rallies.”
Quote of the Day
“The track is my canvas. My car is my pencil” – Graham Hill.