Pound finishes marginally up against the euro

In a relatively quiet day for trading, the pound finished marginally up against the single currency despite the FTSE 100 tumbling 3.5%. Banks led the fall in equity prices following the US rejecting plans for carmakers, prompting worries over the future of the industry. Investors promptly became risk averse, with safe haven currencies being the main beneficiaries. The UK was boosted as mortgage approvals grew almost twice as much as expected in February, and to the highest level seen in almost a year.

News out of the eurozone was poor, with Spain and the Republic of Ireland releasing negative news. It was revealed that the Bank of Spain will take over the Caja Castilla la Mancha, which is the first bank bailout in Spain since the credit crisis reared its head. Shares in other major Spanish banks, such as Santander and BBVA, fell over concerns of the health of the Spanish financial sector. Spain has been hit hard in the past 18 months, with unemployment climbing towards 15% and the housing sector becoming increasingly sluggish. It was also revealed that Standard and Poor’s cut Ireland’s credit rating from AAA to AA+ yesterday, over concerns of the country’s worrying public finances. The agency also warned that the rating could be cut again as debt levels increase.

The UK releases their index of services data this morning, whilst the eurozone reveals their consumer price index figures.

Pound posts small gains against the dollar despite risk aversion

The pound strengthened over the US dollar by 0.33 cents in Monday’s trading to close at the 1.4264 level. Earlier in the day the pound had hit a low of 1.4113 as equity markets fell, risk aversion spread and jitters surfaced ahead of the G20 meeting this week. UK shares fell as much as 3.5% after the US government’s ‘auto task force’ rejected viability plans from General Motors and Chrysler and warned that bankruptcy remained an option. However, the pound did pare its losses in later trading and there were some positive announcements in the UK yesterday - mortgage approvals rose to 38,000 in February from 34,000 in January and the GFK Consumer Confidence index improved.

In today’s trading there has been little movement as investors await the announcement of consumer confidence data, the S&P/Case-Shiller Home Price Index, Chicago Purchasing Managers’ Index and the ABC/Washington Post Consumer Confidence in the US. Whilst there are no major economic announcements in the UK today, investors will be paying close attention to British news ahead of tomorrow’s G20 meeting.

Euro weakens against the dollar as equities fall

The euro weakened against the dollar yesterday following a fall in US stocks. Additionally the Obama administration proposed that the best chance for success for General Motors Corp. and Chrysler LLC may be bankruptcy, while Treasury Secretary Timothy Geithner stated there could be further government assistance in relation to supporting some banks. The euro reached a one and a half week low against the dollar, hitting $1.3117 amid thin trade, as investors await the G20 summit and the ECB’s interest rate decision on Thursday, where they are expected to announce an interest rate cut as well as quantitative easing.

ECB President Jean-Claude Trichet addressed the European Parliament yesterday, stating that the eurozone economy has weakened since January and that there is "a high degree of uncertainty" with regards to economic outlook. Nevertheless, he said there are no substantial risks for deflation and that the central bank will do what is required to abate the financial crisis. This statement improved the euro slightly, following its increasing weakness on the back of news that Standard & Poor's Ratings Services lowered Ireland's long-term sovereign credit rating to 'AA+' from 'AAA.' S & P also downgraded Hungary’s credit rating on Monday to BBB-.

The Consumer Price Index will be released in the eurozone this morning at 10.00 BST. In the US, Consumer Confidence, Chicago Purchasing Managers’ Index and ABC/Washington Post Consumer Confidence will be announced this afternoon.

Kiwi helped by improved business confidence

The New Zealand dollar lost ground to the pound yesterday, remaining largely on the back foot as recent investor optimism was again replaced by risk aversion as equity markets began to drop off recent highs. However, the kiwi dollar recovered some ground overnight after New Zealand Business Confidence came in slightly improved some risk appetite returned to the market.

Aussie dollar weakens before recovering overnight

The Australian dollar weakened against the pound yesterday, retracing some of its previous weeks' gains. The aussie was hit by a decline in equity markets and heightened risk aversion, due largely to the US government’s rejection of plans for further funding for two of the world’s largest car makers. However, the aussie dollar recovered the lost ground overnight, helped by marginally better sentiment and speculation that the Reserve Bank of Australia may hold rates steady at next week's policy meeting.

Midday rates update

Please click on graph to enlarge

Pound/euro volitile ahead of G20

Despite worse than expected revised GDP data from the UK on Friday, the pound strengthened against the euro amid rising expectations that the European Central Bank will move towards quantitative easing. A sharp slump in January industrial orders in the eurozone on Friday also prompted a flight from the euro, and this was exacerbated by comments from German Finance Minister Peer Steinbrueck about the stability of the euro if 'fiscal responsibility is not taken more seriously in Europe.'

The pound has lost some of its gains to the euro this morning following the release of Hometrack's housing survey for March, which showed that the average price for a home in England and Wales plummeted by a record 10.3 percent on the year in March.

Money Supply, Consumer Credit and Mortgage Approvals data will be released in the UK this morning, while Consumer, Industrial and Economic Confidence figures are due from the eurozone today, in addition to a speech by ECB President Jean-Claude Trichet.

Dollar strengthenes on risk aversion

The US dollar strengthened over the pound by 1.31 cents on Friday as falling US stocks saw the dollar’s safe haven demand increase. At the same time it was announced that the UK’s gross domestic product, the size of the economy, shrank by 1.6% in Q4 2008 and by 2% in the year. This was the largest quarterly contraction since 1980 and saw the pound sold off as fears resurfaced about the health of the British economy. Comments from senior Russian central bank staff and the managing director of the IMF supported the view that the dollar would remain the world’s reserve currency for some time and this gave the greenback a boost.

Over the weekend the pound fell a further 0.89 cents against the dollar to open at the 1.4231 level, and the greenback has continued its march during today’s trading. Investors have become risk averse ahead of this week’s G20 meeting in London and news that the US government task force has rejected the turnaround plans of General Motors and Chrysler. Later today M4 money supply, mortgage approvals and net lending to individuals data will be released in the UK, while there are no major economic announcements due in the US.

Euro undermined against dollar as ECB rate cut looks likely

The dollar strengthened against the euro on Friday on the view that the ECB will cut interest rates and announce quantitative easing measures at their next meeting on 2 April. The euro also weakened on the back of comments by German finance minister Peer Steinbrueck about the strength of the euro if 'fiscal responsibility is not taken more seriously in Europe.'

A fall in eurozone industrial orders in January and a weak performance on Wall Street on Friday also resulted in investors flocking to the safe haven of the dollar. US GDP data was not as dire as anticipated - it fell by an annual rate of 6.3% in the final quarter of last year, but this was still better than consensus forecasts from economists of a 6.6% fall.

This morning the dollar continued to strengthen against the euro. There are several announcements taking place in the eurozone today including Consumer Confidence, Economic Confidence and Industrial Confidence due to be released at 09.00 GMT. Additionally the ECB’s Trichet will be making a speech at 14.30 GMT. There are no significant announcements taking place in the US today.

Aussie dollar comes off highs

The Australian dollar remained just off recent highs as stocks ended on a downward note late on Friday. After a recent strong run on equity markets investors remain cautious over any potential further gains. Much of this week’s direction is likely to be driven by the upcoming G20 meeting on Thursday. Both the Australian and British leaders are calling for a more coordinated approach to stimulating the world economy. However, it remains to be seen whether all the participating countries can agree on a workable consensus.

Kiwi dollar holds ground

The New Zealand dollar remained firmer over the weekend, as it was backed by better than expected GDP data on Friday. The figures showed a 0.9 percent contraction in the fourth quarter, but markets reacted positively as this beat forecasts of more than a 1 percent drop.

Midday rates update

Please click on table to enlarge

Pound falls against Aussie dollar

The Australian dollar strengthened further against sterling yesterday, after figures revealed UK retail sales in February fell 1.9 percent. This was almost five times greater than what was forecast and only added to the economic gloom. With rising unemployment, falling house prices and continuing tight credit conditions it seems unlikely that the retail sector will improve over the short to medium term. Rumours have also now surfaced of a possible rift between the government and the BoE. Mervyn King, the BoE Governor, commented this week that there was little room for extra economic stimulus going forward. Prime Minister Gordon Brown, however, seems to be championing the cause of a coordinated economic stimulus going into the next G20 meeting.

Pound falls lower against euro

The pound was sluggish against the single currency yesterday as softer than expected retail sales figures for February worried investors. The inclement weather and poor economic conditions kept consumers away from the high street, with the monthly fall of 1.9% taking the annual growth rate to 0.4% - the weakest since 1995. Sterling was also under pressure following Wednesday’s failed gilt auction, the first failed auction since 2002, although yesterday did bring some relief to the market as a sale of £1.1bn of index-linked gilts due 2022 was 2.72 times covered.

Barclays bank are also expected to receive some brighter news today as they have passed an FSA stress test, the same one that resulted in Lloyds Banking Group participating in the governments asset protection scheme. The news will boost Barclays as it strives to keep out of the hands of the government.

The eurozone releases their industrial new orders data this morning, whilst within the UK GDP figures for the fourth quarter of 2008 are revealed.

Poor retail sales sees cable push lower

Worse than expected retail sales data saw the pound weaken by 1.02 cents against the US dollar yesterday, closing the session at the 1.4451 level. Early gains were pared after it was shown that UK retail sales fell 1.9% in February and 0.4% in the year to February. This news out-weighed any gains that were to be made from the news that the rate at which total business investment was falling in the UK had eased, falling only 1.5% in Q4 2008. Improved risk appetite during the US session failed to buoy the pound when investors drew confidence from rallying stocks and commodities. In the US, gross domestic product figures confirmed that the American economy contracted by 6.3% in 2008 whilst jobless claims data showed that there were 624,000 new claimants on top of the 5,560,000 people who continue to receive support.

In today’s trading the pound has continued to slide ahead of the significant announcement of gross domestic product figures in the UK at 09.30 GMT. Also announced in the UK today are Nationwide house prices and current account data. In the US there is a barrage of major economic announcements this afternoon, which includes core personal consumption expenditure, personal income and personal spending figures, as well as the release of the Reuters/Michigan Consumer Sentiment Index.

Dollar posts gains on euro

The euro weakened slightly against the dollar yesterday following US Secretary Timothy Geithner’s comments that the dollar remains strong and will continue to be the global reserve currency. Geithner stated that he rejected the idea of a new global currency, a suggestion made recently by the head of China's central bank.

A German consumer sentiment survey fell slightly yesterday, the first drop since October. In the US, it was announced that Gross Domestic Product and Initial Jobless Claims data was better than anticipated, despite an increase in continuing jobless claims. Nevertheless trading remained fairly flat as investors are awaiting the eagerly anticipated ECB interest rate decision, due next Thursday, where the ECB are expected to announce a further interest rate cut.

There are several significant announcements taking place in the US today, including Core Personal Consumption Expenditure, Personal Income and Personal Spending.

Kiwi dollar strengthens on RBNZ's hawkish stance

The New Zealand dollar surged overnight after many investors, searching for higher yields, have taken the view that the RBNZ is almost finished its monetary easing. With official rates at 3 percent the central bank has previously signalled that it does not expect rates to be reduced much further. The kiwi dollar also gained support when figures released overnight showed New Zealand GDP shrank by less than expected.

Morning Rates Update

Please click on table to enlarge

Sterling falls as gilt auction fails to find buyers

The pound fell sharply against the euro yesterday, losing around 2 cents following news from the British Debt Management Office, which conducts UK Treasury bond auctions, that there weren’t enough interested buyers for the UK government’s £1.75 billion gilt auction. This is the first time in almost seven years that such an auction has failed, which puts Prime Minister Gordon Brown in a precarious position. The British government plans to sell a record £146.4 billion worth of gilts this year and up to £147.9 billion next year to pay for the tax cuts and fiscal spending intended to dig the UK out of recession. But with demand seeming lackluster it may become increasingly difficult and more expensive for the government to fund its economic recovery efforts.

Sterling was also undermined yesterday by a sharper than expected fall in the Confederation of British Industry's distributive trades survey balance.

M3 Money Supply figures are released in the eurozone this morning, while Retail Sales figures are due from the UK today.

Pound falls against the US dollar

The pound weakened against the US dollar yesterday by 1.25 cents to close the day at the 1.4553 level. This was on news that there was not enough interested parties willing to purchase UK government bonds. The British Debt Management Office reported that they could not sell their $1.75 billion gilts at auction, which is the first time this has happened in 7 years and raises serious questions about Britain’s ability to pay for its planned spending in the coming years. Trading was very choppy in the second half of the session after Treasury Secretary Geithner surprised the markets by suggesting he was open to expanding the use of the International Monetary Fund’s special drawing rights. Investors initially took this as an endorsement of China’s proposal on Monday to replace the dollar as the world’s reserve currency, however an initial sell off in the dollar was later reversed.

In today’s trading the market has remained around yesterday’s close ahead of the announcement of Retail Sales and Total Business Investment figures in the UK, whilst in the US Gross Domestic Product and Jobless Claims data will be released this afternoon.

Dollar weakens against the euro

The dollar weakened against the euro yesterday as investors weighed prospects for a US economic recovery in light of the US government’s plan this week to cleanse banks of bad assets. The dollar was also undermined when US Treasury Secretary, Timothy Geithner, shocked the markets by saying Washington was open to the idea of a new global reserve currency run by the International Monetary Fund to replace the dollar. However, the dollar regained some support when Geithner later qualified his remarks by reaffirming the dollar's role in the world financial system, and President Obama stated that the dollar remained a strong currency.

The euro gained ground despite grim data out in the eurozone, including news from Germany that business confidence fell to its lowest level ever in March. However, some analysts expect the euro to weaken next week as many predict the ECB will announce a further interest cut, and some expect the central bank to discuss quantitative easing measures at their next meeting as well.

There are several significant announcements taking place in the US today including Gross Domestic Product and Jobless Claims.

New Zealand dollar remains in recent ranges

The New Zealand dollar remained in recent ranges yesterday, despite figures revealing a slip in consumer confidence. Markets had expected a decline in this figure, reflecting the gloomy economic environment, but were in fact surprised the decline was so modest. Investors will now focus on key domestic data out over the next two days, which includes Gross Domestic Product data this evening.

Australian dollar recovers from previous day's losses

The Australian dollar recovered from previous day’s losses against sterling yesterday, after data revealed UK retail sales fell more sharply than expected in March. Sterling was also weighed down by a Gilt auction not being fully covered, suggesting a reduced demand for sterling assets. Analysts blamed this in part on the BoE, who created some uncertainty in the market by saying they may scale back their program of gilt purchases if it was especially successful in spurring the economy. Further UK retail figures will be released today.

King comments and inflation data sees pound strengthen over euro

The pound continued its recent upwards trend against the single currency yesterday after inflation unexpectedly rose in February and Bank of England Governor Mervyn King said the central bank's quantitative easing programme may be reduced if it is successful. Consumer Price Inflation rose to an annual rate of 3.2%, despite many expecting that it would actually fall to 2.6%. As expected the Retail Price Index fell, but not into negative territory yet, with it currently sitting at 0%. Mervyn King stated that CPI’s surprise jump was due to the pound’s weakness making imports more expensive. It was also interesting to note that King warned against further borrowing to stimulate the economy, due to the already dire state of the UK’s finances.

The Confederation of British Industry release their distributive trades survey this morning, whilst IFO release the business climate and expectations survey in Germany.

Cable pushes higher on supprise UK inflation data

In Tuesday’s trading the pound strengthened over the US dollar by 2.06 cents to close the day at the 1.4680 level. During the session the pound set a six-week high of 1.4778 after it was buoyed by higher than expected inflation data. The Retail Price Index (RPI) measured inflation at 0.0% in the year to February, the first time in 49 years that inflation has fallen this low and came as a result of a 0.9% fall on the month. The Consumer Price Index (CPI), a measure of inflation which excludes mortgages, currently stands at 3.2% on the year, whilst Core CPI, which excludes the prices for volatile items such as food and energy, was measured at 1.6%. These results were higher than expected, with many investors expecting the RPI to fall below 0.0%. This news, as well as improved risk appetite from the announcement of the Public-Private Investment Programme on Monday in the US, saw demand for the pound remain firm. Comments from the BoE Governor Mervyn King also helped the pound as he suggested that the UK’s quantitative easing programme could not be expanded.

In today’s trading investor sentiment has shifted toward a more risk averse stance and as such the dollar has strengthened back over the pound as its safe haven demand has increased. Later today MBA Mortgage Applications, Durable Goods Orders, New Home Sales and EIA Crude Oil Stocks Change data is announced in the US. Meanwhile the Confederation of British Industry release their distributive trades survey in the UK this morning.

US dollar recovers against euro on poorer sentiment

The US dollar recovered ground against the euro yesterday, recovering almost 2 cents as investors bought back into the safe haven currency as recent risk appetite faded somewhat. North American equity markets finished lower yesterday evening, a day after a big rally that was driven partly by news of the US plan to help rid banks of toxic assets. As optimism about that plan faded yesterday the US dollar rose as its safe-haven appeal increased.

Also, the euro was undermined as traders shifted their focus to a change of tone from European Central Bank members that suggested impending economic measures from the eurozone. Both ECB President Jean-Claude Trichet and governing council member Axel Weber said eurozone rates aren't at their bottom. The European Central Bank has not announced quantitative easing plans as of yet, but some analysts are now predicting that a rate cut at the ECB’s next meeting on 2nd April may be combined with news of quantitative easing.

In Germany, IFO Expectations are due to be released this morning at 09.00 GMT. In the US, there are several significant announcements taking place today including MBA Mortgage Applications, Durable Goods Orders and New Home Sales.

Pound strengthens over Aussie dollar

The Australian dollar fell from its 10 week high against sterling yesterday after UK inflation rose unexpectedly in February. The rise in British consumer price inflation is believed to be temporary due to sterling’s recent weakness. This was coupled with Bank of England Governor Mervyn King’s comments that the central bank’s quantitative easing programme may be reduced if it is successful. Support for sterling was also seen as investors cheered a US plan to soak up toxic assets which have plagued the credit markets, however gains were limited by weaker equities.

Kiwi dollar weakens against pound

The New Zealand dollar fell lower yesterday as a slip in global equities saw risk appetite weaken. The kiwi dollar’s advance was also kept in check ahead of expected weak economic data, with fourth quarter current account and gross domestic product data due later this week. Current account data will be avidly watched this evening after Finance Minister Bill English warned about New Zealand’s ‘challenge of chronic twin deficits’.

Close of business rates update

Please click on table to enlarge

A good day for the pound....

GBPEUR: 1 week chart. Please click on chart to enlarge


GBPUSD: 1 week chart. Please click on chart to enlarge


GBPJPY: 1 week chart. Please click on chart to enlarge


GBPAUD: 1 week chart. Please click on chart to enlarge


GBPNZD: 1 week chart. Please click on chart to enlarge

Midday Rates Update

Please click on table to enlarge

UK inflation hits 0%, lowest level in 49 years

It was announced in the UK this morning that the Retail Price Index (RPI) measured inflation at 0.0% in the year to February. This is the first time in 49 years that inflation has fallen this low and came as a result of a 0.9% fall on the month. The Consumer Price Index (CPI), a measure of inflation which excludes mortgages, currently stands at 3.2% on the year.

These results are better than expected as many investors were expecting RPI as a measure to fall below 0.0%. The pound has shown good strength in this morning’s trading against a basket of major currencies as this news, as well as improved risk appetite from yesterday’s announcement in the US, sees demand for the pound remain firm. The US government’s Public-Private Investment Programme has buoyed investor confidence and stock markets around the world continue to perform well.

The pound currently stands 1.70% up on the euro and 1.15% up on the US dollar. A market update will follow this post with full data.

Risk appetite sees pound strengthen over euro

Sterling regained further ground against the single currency yesterday, following improved risk appetite in markets. This has come following the announcement in the US that they are set to adopt a $1 trillion plan to free banks of toxic assets – investors reacted with enthusiasm to the plan as equity markets around the world rose, with the FTSE 100 up by 2.9%. In early trading today the pound is continuing to rally, as risk appetite remains following a rally on Asian stock markets overnight.

Investors will take note of the UK’s February inflation data today, with the Consumer Price Index expected to fall further towards the Bank of England’s 2% target. The Retail Price Index is expected to turn negative for the first time in nearly 50 years, with the Consumer Price Index expected to follow in the summer as the UK flirts with a period of deflation.

The eurozone releases their PMI manufacturing and services data this morning, but expect GBP / EUR to take direction off equity markets today.

US bank plan benefits pound

The pound strengthened over the US dollar by 0.98 cents in Monday’s trading to close the day at the 1.4572 level. The US government yesterday announced a $1 trillion plan to free the US financial system of toxic assets and investors welcomed the news enthusiastically. The FTSE 100 jumped 2.9%, the Dow Jones 6.8% and the S&P 500 7.1% as investors speculated that the ‘Public-Private Investment Program’ would benefit the global economy in the long term. The plan aims to take $100 billion from the ‘Troubled Asset Relief Program’ and leverage this to $500 billion using low-interest loans and guarantees from the ‘Federal Deposit Insurance Corporation’ (FDIC) and the Federal Reserve (Fed). It is then hoped that this will encourage private investors to take part in the scheme, and the US government has confirmed that there is scope to potentially expand the program to buy $1 trillion of toxic assets. This money will then be split and used in two different ways, first to buy toxic credit securities from bank’s balance sheets and second to buy and remove bad loans. With the dollar’s safe haven attraction eroded, the pound was able to post gains, however the dollar’s slide was pared after better than expected existing home sales were announced in the US.

In today’s trading the pound has continued to strengthen over the US dollar as yesterday’s announcement continues to see demand for the dollar as a safe haven fall. Later today consumer price index and retail price index data is announced in the UK. In the US housing price index figures will be announced, as well as data from the Richmond Fed Manufacturing Survey and the ABC/Washington Post Consumer Confidence Survey.

Euro undermined against dollar

The euro weakened against the dollar yesterday following the release of a larger than expected trade deficit for the eurozone. Data released by Eurostat showed that the eurozone recorded a trade deficit of €10.5 billion in January, widening sharply from a revised €1.7 billion deficit in December. The euro fell to a four-day low of 1.3485 against the dollar. Last week it hit a 2 and a half month high of 1.3738.

European Central Bank President Jean-Claude Trichet said in a Wall Street Journal interview that the central bank could lower its interest rate further, which at the moment is at a record low of 1.5%. However, he also said he does not see any impending need to modify current stimulus plans.

There are several significant announcements taking place in the eurozone this morning, including Purchasing Manager Index Manufacturing and Current Account data at 09.00 GMT. In the US, Housing Price Index, Retail Price Index and the Richmond Fed Manufacturing Index will be released at 14.00 GMT.

Improved risk appetite benefits Aussie dollar

The Australian dollar reached near 10 week highs against sterling yesterday, as higher stocks boosted demand for risk. This helped the aussie further, with it being one of the world’s higher yielding currencies. Sterling still remains under pressure due to its continuation of quantitative easing. It was also not helped by comments from BoE policy maker, David Blanchflower, who stated that Britain's economy may not recover this year and unemployment was likely to continue to rise rapidly. Investors will today focus on UK inflation data. One of the arguments against quantitative easing is that it is likely to build inflationary pressures, however this data will be too early for any possible affects to be seen.

Kiwi dollar continues march

The New Zealand dollar remained well supported yesterday as US plans to relieve banks of toxic debt increased investor optimism. Rising equity markets are increasing demand for riskier assets, helping support the kiwi; however, analysts remain skeptical that this support will remain for very long. Global economic conditions continue to remain tough and poor readings from domestic data due later this week may start to weigh on the kiwi.

Close of business rates update

Please click on table to enlarge

Report: Kiwi dollar performs well despite domestic woe

The New Zealand economy has contracted at its fastest pace in 18 years as it was announced that the country’s recession has got worse in the fourth quarter. The economy contracted 0.4 percent in the third quarter, and 0.2 percent and 0.3 percent in the second and the first quarters of last year.

The RBNZ has cut interest rates to a historic low of 3%. Analysts are predicting that there will be another quarter percentage point cut taking place at the RBNZ’s next meeting on April 30. Fourth quarter GDP is anticipated to be 1.9 percent lower than a year ago.

However in the last week, the New Zealand dollar has rallied and posted the best weekly gains in 24 years. This comes on the back of news that the US Federal Reserve is planning to buy $300 billion of government debt which has resulted in the weakening of the US dollar as risk appetite is promoted and investors speculate that the greenback will be oversupplied. Also rallying equities have helped the NZ dollar's appeal and it's comparatively higher interest rate has seen investor demand remain firm.

New Zealand will be announcing key GDP data on March 27. The deepening recession in New Zealand has resulted in the country’s foreign exchange rating to be downgraded from stable to negative in January mainly in response to its expanding current account deficit. Investor's will watch carefully to see how this effects the New Zealand dollar's appeal.

GBPEUR: one month. Please click on graph to enlarge.

Midday Rates Update

Please click on table to enlarge

Pound close to 7 week low against the euro

In a quiet end to last week, the pound regained value against the single currency but stayed close to the seven week low of 95 pence per euro hit on Wednesday. Sterling came under pressure last week after a raft of soft economic data underlined the UK’s current economic plight, including rising unemployment and a CBI survey revealing that manufacturing orders fell at their fastest rate in 17 years. Investors will take a keen note of data releases in the UK this week, with inflation figures for February being released on Tuesday, followed by key retail sales numbers on Thursday and the final estimate of fourth quarter gross domestic product on Friday, alongside the current account balance.

Within the eurozone today construction output figures and trade balance figures are released this morning, with there being no major economic announcements due in the UK today.

Dollar suffers worst weekly loss for 24 years

The US dollar strengthened back over sterling by 0.45 on Friday to close at the 1.4459 level, but still suffered its worst weekly losses for 24 years against a basket of major currencies. News that the Federal Reserve will print more than $1 trillion, to purchase government and mortgage-backed debt in a bid to cut interest rates and kick-start lending, saw the dollar weaken the most since the 1985 Plaza Accord, when major economies agreed to a formal depreciation of the dollar. The dollar’s strength on Friday was driven by investors buying back into the greenback and taking their profits from earlier positions.

In today’s trading the pound has strengthened back over the US dollar, sitting comfortably over a cent up on the day, having reached a high of 1.4625. Improved risk appetite has seen investors’ demand for the pound increase and the dollar has been heavily sold as investors speculate that the Fed’s plans will see the greenback heavily over supplied. Later today Nationwide Housing Prices are announced in the UK, whilst in the US Existing Home Sales data is announced. There is also a speech from Treasury Secretary Geithner today and President Obama is expected to announce details of a three-part strategy to rid the US financial system of toxic assets.

Dollar recovers a little ground against the euro

The dollar recovered some of its recent losses against the euro on Friday, but still fell heavily over the week, following the news of the Federal Reserve’s decision to buy $300bn of long-term government debt. Concern that the Fed’s plans could prove too costly and result in inflationary pressures prompted demand for the safe haven of the dollar on Friday, analysts said.

The euro’s strength was undermined by some grim data from the eurozone. A report from Eurostat showed a 3.5% monthly decline in the region’s industrial output in January. Concern over plans to prevent members of the eurozone from going bankrupt also undermined appetite for the euro.

This morning trade balance and construction output data is due from the eurozone at 10.00 GMT. In the US, existing home sales data will be announced at 14.00 GMT and the Treasury’s Geithner will be making a speech at 22.00 GMT.

Kiwi's strength may be short-lived

The New Zealand dollar made further gains over the weekend, still being driven by the slump in the greenback and a rebound in stock markets stoking investor risk appetite. However, most in the market believe that the kiwi will be unable to sustain these recent gains as the prospect of further poor domestic data this week could drag it back down again. This week sees the release of fourth quarter current account and gross domestic product data. Most analysts are expecting further evidence of a continuing deep recession, which has investors bracing themselves for possibly worse than expected figures.

Aussie dollar makes small gains over the weekend

The Australian dollar made small gains against sterling over the weekend, as investors took a breather from recent gains in equity markets and an improvement in risk aversion. Last week markets were largely dominated by the Federal Reserve's decision to start quantitative easing. Investors will now turn their attention to a number of data releases due this week, which includes UK inflation and retail sales figures along with GDP and current account data. Sterling has remained under pressure in recent months after a continuous stream of poor economic results. The key question remains how much more negativity can the market build into the pound. Some in the market believe sterling is now undervalued.

Pound undermined against euro on poor economic outlook

The pound tumbled against the single currency yesterday after it was confirmed that UK unemployment had jumped by the largest margin on record and to a 12 year high, pointing towards a deepening recession. Economists are now expecting that unemployment may rise above the 3 million mark in 2010 as the UK’s economy continues to slow. The IMF also revised its economic outlook for many industrialised nations yesterday, with Japan and the UK facing negative growth in 2010 as well as this year. The eurozone is expected to remain fairly stagnant but crucially, and in contrast to the UK, it is not expected to contract next year.

The Bank of England also released their minutes yesterday, and it is expected that in addition to the £75bn that has already been created, the central bank will have to print more money to stave off an even deeper recession going forward. The decisions to cut interest rates by 0.5% and print more money were unanimous by the MPC.

The Confederation of British Industry release their industrial trends survey this morning, whilst there are no significant releases due from the eurozone today.

Dollar weakens on quantitative easing announcement

In Wednesday's trading the pound strengthened over the US dollar by 2.32 cents to close the day's trading at the 1.4268 level. Earlier in the day the pound had traded as low as 1.3849 after it was announced that unemployment in the UK had exceeded 2 million and investors took a poor view of the health of the UK economy. It was also reported that the number of unemployed claiming benefits shot up at the record rate of 138,400. However, the pound’s fortunes were reversed after it was announced in the US that the Fed would engage in quantitative easing in order to stimulate the economy. Using $300 billion, the Fed plans to buy long-dated treasuries in a bit to flood the credit market with dollars and encourage lending to the private sector. It will also use over $1 trillion to buy securities and debt from mortgage finance agencies. The dollar weakened as investors see the ever expanding US budget deficit as having long term negative effects.

In today's trading the pound has continued to strengthen on continued dollar selling after yesterday's announcement. The CBI Industrial Trends Survey due in the UK today will reveal expert projections on manufacturing costs, exports, and prices, while the BoE will report on the current sterling in circulation. In the US, the Philadelphia Fed Manufacturing Survey will be published, along with initial and continuing unemployment claims data.

US dollar falls to two-month low against euro

The dollar fell to a two month low against the euro as the Federal Reserve said it will purchase US$300 billion of longer-term Treasuries, increasing speculation that the central bank is debasing the currency. The dollar fell as much as 2.9% to US$1.3435 per euro, the biggest intraday decline since 17 December. The Federal Open Market Committee stated “to provide greater support to mortgage lending and housing markets, the committee decided today to increase the size of the Federal Reserve’s balance sheet further by purchasing up to an additional $750 billion of agency mortgage- backed securities. Moreover, to help improve conditions in private credit markets, the committee decided to purchase up to US$300 billion of longer-term Treasury securities over the next six months.”.

Fed Chairman Ben Bernanke is taking a new approach to monetary policy after it was announced that unemployment had risen to 8.1 percent and economists forecast the economy will shrink through the middle of the year. The Fed also kept the benchmark interest rate at between zero and 0.25 percent and said it will consider expanding the Term Asset-Backed Securities Loan Facility to include “other financial assets”.

There are no significant releases due from the eurozone today. In the US, Jobless Claims and the Philadelphia Fed Manufacturing Survey are due this afternoon.

Aussie hits six-week highs against sterling

The Australian dollar reached six week highs against sterling yesterday, after the US Federal Reserve surprised markets by offering to buy long term treasury bonds. The radical attempt to stimulate the world’s largest economy caused some optimism about reviving global growth, which would in turn increase demand for Australian commodity based exports. However, sterling continues to be punished by a raft of poor economic news. Employment figures revealed unemployment in the UK passed 2 million, reaching a 12 year high, while the number of people claiming jobless benefits in February jumped by the biggest amount since records began some 30 years ago.

Kiwi dollar report

The New Zealand dollar remained in recent ranges overnight as markets continue to digest the shock announcement by the US Federal Reserve. This is likely to put pressure on the greenback for the short term, which may help support the kiwi, provided people believe the plan may help stimulate the global economy in the longer term. However, investors are likely to remain cautious given that very little positive economic data is being released.

Euro posts gains against US dollar

During early Asian trading this morning the euro climbed to a 2-day high against the US dollar, due to an increase in investors’ risk appetite after surprise German and US data released yesterday. German economic sentiment improved in March, defying economists' expectations. The Mannheim-based Centre for European Economic Research, or ZEW, said its economic sentiment indicator for Germany rose 2.3 points to minus 3.5 in March, the highest since July 2007. It also marked the fifth consecutive month of increase. Economists had forecast a decline to minus 8 from minus 5.8 recorded in the previous month. However, the indicator is still below its historical average of 26.2.

Consumer confidence in the United States improved last week, but remained in negative territory overall, according to survey results released yesterday by ABC News and the Washington Post.

In the UK Bank of England minutes, ILO Unemployment Rate and Jobless Claims change data will be released at 09.30 GMT. In the US, Consumer Price Index will be announced at 12.30 GMT. The Fed Interest Rate decision will take place at 18.15 GMT today.

Pound/Aussie pushes lower

The Australian dollar was slightly firmer against sterling yesterday, after a further rally in global equities eased investor risk aversion even more. Despite some upbeat data from Germany and the US, sentiment on the UK economy remains largely negative. This was reinforced by housing data which showed that prices fell 11.5 percent on the year in January. Investors continue to remain cautious as upcoming events later today could easily send markets back into an extreme risk aversion mode. Domestically, the BoE minutes from the last meeting are released, as well as unemployment figures. Investors will then turn their attention to the US Federal Reserve decision on interest rates. As interest rates are effectively at zero markets will concentrate on whether the Fed will follow the BoE's lead and utilise unconventional methods to stimulate the economy.

Pound continues to weaken against Kiwi dollar

The New Zealand dollar remained largely range bound yesterday as it continued to be supported by the recent improvement in equity markets. With little major domestic data due for the rest of the week the kiwi will be directed by broader market movements, in particular the Federal Reserve’s policy meeting which ends later today.

Closing rates update

Please click on the table to enlarge

Euro strengthens over pound

The pound rose against the single currency yesterday, as gains in share prices and news that British bank Barclays may sell a fund management unit to boost its capital base improved appetite for the pound. Shares in Barclays rose 22% following the announcement, and news that the bank had a ‘strong start to 2009’ created some confidence in markets and investors duly bought into perceived higher risk currencies such as the pound.

The Bank of England also held its second auction yesterday as part of its quantitative easing policy to boost money supply in the economy. The central bank bought just under £2bn worth of long dated gilts in its auction. Investors will take particular note of the economic confidence survey released by ZEW in Germany this morning, and the direction that equity markets take.

Pound stalls against US dollar

The pound strengthened over the US dollar by 1.01 cents in yesterday's trading to close at the 1.4061 level. The pound's performance was driven by improved sentiment amongst investors, with risk appetite improving as share prices increased. The FTSE 100 index rose 2.9%, with Barclays shares up 22% on news that it was planning to sell its iShares unit to raise capital. This news was welcomed by investors who speculated that the money generated could pay for Barclays' participation in a UK asset protection scheme. Although the pound reached a high of 1.4229 it did pare some of its gains in late trading as demand for the dollar rose despite it being announced that US industrial production fell 1.4% in February.

Today's trading has remained quiet with the market currently sitting around yesterday's close. This is ahead of the announcement of DCLG House Price Index data in the UK and Building Permits, Housing Starts and Producer Price Index figures in the US. Investors are trading cautiously ahead of the announcement of Bank of England minutes and the Fed's interest rate announcement tomorrow. Whilst the US interest rate target is 0.0% to 0.25% and there is no scope to go lower, comments from the Fed will be eagerly anticipated.

Euro continues to perform well over US dollar

The euro rose against the dollar yesterday, hitting a 5-week high amid growing risk appetite after financial ministers from the G20 meeting concluded their summit in Britain over the weekend, vowing to do "whatever is necessary" to fix the global economy, including supervision of freewheeling hedge funds and restoring bank lending by dealing with the shaky securities burdening their finances.

Meanwhile, US Federal Reserve Chairman Ben Bernanke said the US had averted the risk of plunging into a depression, telling CBS' "60 Minutes" in an interview aired Sunday that the recession there would "probably" end in 2009. His comments came ahead of a two-day meeting by the Fed that begins today. The Fed is anticipated by some to announce new methods to spur lending to get Americans spending again. Any decisions will be announced tomorrow.

In the eurozone today the ZEW Economic Sentiment Survey at 10.00 GMT will be of particular significance. In the US, Housing Starts and Producer Price data is due to be announced at 12.30 GMT.

Euro continues to perform well over US dollar

The euro rose against the dollar yesterday, hitting a 5-week high amid growing risk appetite after financial ministers from the G20 meeting concluded their summit in Britain over the weekend, vowing to do "whatever is necessary" to fix the global economy, including supervision of freewheeling hedge funds and restoring bank lending by dealing with the shaky securities burdening their finances.

Meanwhile, US Federal Reserve Chairman Ben Bernanke said the US had averted the risk of plunging into a depression, telling CBS' "60 Minutes" in an interview aired Sunday that the recession there would "probably" end in 2009. His comments came ahead of a two-day meeting by the Fed that begins today. The Fed is anticipated by some to announce new methods to spur lending to get Americans spending again. Any decisions will be announced tomorrow.

In the eurozone today the ZEW Economic Sentiment Survey at 10.00 GMT will be of particular significance. In the US, Housing Starts and Producer Price data is due to be announced at 12.30 GMT.

Pound/Aussie remains flat

The Australian dollar continued to trade within recent ranges against sterling yesterday, with little new economic data released from either country. Despite a small improvement in risk appetite investors remain cautious, particularly ahead of major economic releases later in the week. A recent strong run in equity markets has helped stabilise markets for the time being, however this seems unlikely to last.

Kiwi dollar continues march

The New Zealand dollar consolidated on recent gains as rising stocks helped improve investor risk appetite. However, further gains were capped by local data which pointed to a deepening recession. Fourth quarter manufacturing figures showed sales volumes were the worst on record. Despite a small improvement in the contracting service sector analysts are now forecasting that the economy in the fourth quarter may have contracted at its fastest rate in over a decade.

Pound performs generally well

In the afternoon's trading the pound has given up most of it's earlier gains against the euro as the single currency has responded well to rising stock prices. However the same rising stocks have seen the pound perform well against many currencies, including the dollar dollar and yen. The FTSE 100 currently sits 2.11% up on the day.

Please click on table to enlarge

Eurozone data

The following data has just been announced in the eurozone:

Consumer Price Index: +0.4% in Februrary 2009
Consumer Price Index: +1.2% in Februrary 2009 (year on year)

Employment Change: -0.3% in Q4 2009
Employment Change: 0.0% in 2009

This data shows that unemployment did start to increase in the last 3 months of 2009 and that inflationary pressures persist in the eurozone. The pound currently sits 0.8 cents up over the euro on the day at the 1.0908 level.

Improved sentiment sees pound gain over euro

The pound enjoyed a positive finish to the end of last week as brighter investor sentiment boosted riskier assets. Sterling’s gains were capped somewhat as the single currency was still benefiting from the Swiss central bank’s decision on Thursday to weaken their currency, with investors buying into the euro. The pound benefited from some confidence returning to the market as there was the belief that large US banks may be able to survive without nationalisation. Nonetheless, the economic picture in the UK remains poor with unemployment set to surge over the two million level this week, with official figures expected to confirm that unemployment has risen by almost 176,000 in the three months to January.

There are no major announcements due in the UK today, whilst within the eurozone, investors will be particularly interested in the consumer price index figures being released, giving an indication of inflation, and the employment change data due this morning.

Sterling pushes higher against dollar

The pound gained ground against the dollar on Friday, and has continued to strengthen to a 1-week high this morning, as investors bought back the riskier currency following the broad sell-off of sterling last week.

Sterling had been sold off last week amid concerns over the health of the British banking industry and skepticism about the BoE's quantitative easing program. However, the pound shrugged off these concerns on Friday and strengthened against most major currencies as equity markets in the UK were dragged higher by gains in Asia and Europe.

There are no significant releases due from the UK today, while a raft of data is due from the US – Empire Manufacturing, Long-Term TIC Flows, NAHB Housing Market Index and Industrial Production figures are all released in the States this afternoon.

Euro performs well against US dollar

On Friday the euro strengthened by 0.18 cents against the dollar to close the day's trading at the 1.2926 level in what was a volatile day's trading. During the day the dollar had swung between gains and losses following performance on equity markets, but it closed down as stocks posted weekly gains and improved risk appetite saw the dollar's safe haven appeal eroded. During the session it had been announced that the rate at which eurozone retail sales were falling had decreased, -2.2% in the year to January as opposed to -2.4% in December. In the US, the rate at which import prices was falling also slowed, the trade balance was shown to have shrunk from $39.90 billion to $36.03 billion and the Reuters/Michigan Consumer Sentiment Index showed improvement. All these announcements had the effect of improving sentiment amongst investors and as risk appetite increased, the euro became a more attractive opportunity.

In today’s trading the euro has strengthened against the dollar with investors expecting that the US government will announce initiatives to buy long term Treasuries to help keep interest rates down. In the coming week the US Treasury will share more information on how bad assets will be taken off banks’ books with public-private partnerships. Later today the EU will release the Consumer Price Index to measure inflation and purchasing tendencies, as well as employment change data. In the US, industrial production, the New York State Empire State Manufacturing Index, and Treasury International Capital reports are released.

Aussie weakens against the pound

The Australian dollar remained in narrow ranges against sterling over the weekend, as rises in regional stock markets saw investors start to consider taking on riskier assets again. However, the pound remained weighed down by the BoE's continuing programme of quantitative easing. The central bank announced details to purchase another 5 billion pounds of UK Gilts. Little major domestic data is due out of either country today, so direction is likely to come from broader market movements as well as corporate news.

Kiwi dollar posts gains

The New Zealand dollar made small gains over the weekend, underpinned by increased demand for higher yielding currencies on the back of solid gains from equity markets. The kiwi also gained strength after the Reserve Bank of New Zealand signalled that it was near the end of its easing cycle.