The pound weakened slightly against the euro yesterday as more positive news from the eurozone increased investor appetite for the single currency. A report released by the European Commission yesterday showed improved economic sentiment in the region, as the index rose from 64.7 points in March to 67.2 this month, much better than the 65.2 points analysts had predicted. Moreover, European equity markets rose following solid first-quarter profits of £2.26 billion from Royal Dutch Shell and £1.9 billion from Spanish banking giant Santander, which further improved appetite for the single currency as investors speculated that the a tentative economic recovery in the eurozone may be underway.
However, the euro’s gains were capped yesterday as better-than-expected retail sales data released by the CBI on Tuesday improved investor sentiment that the UK may be coming out of recession. In addition, news of strong demand at a UK gilt auction earlier this week, the first since UK Chancellor Alistair Darling announced a record high £220 billion issuance for the coming fiscal year in the budget last week, buoyed investor mood. Finally, speculation surrounding what measures the European Central Bank intends to implement at their next policy meeting hampered the euro’s gains, as investors in the eurozone speculated that the bank could announce a quantitative easing program similar to the one that appears to be working in the US. Indeed, the US Fed last night voted to leave their stimulus measures unchanged, sighting tentative “green shoots” in the global economy, therefore making it increasingly likely the ECB will follow suit to get the region out of recession. As a result, continued speculation over what the bank will decide, together with positive economic data released on both sides of the English Channel, capped the single currency’s gains against sterling, although it still finished the day up at 1.1122.
There are a couple of pieces of important economic data out in the eurozone and UK today. In the eurozone March’s Unemployment Rate is released at 10.00 BST, whilst in the UK Year-on-Year Nationwide House Prices data for March is due today.
Thursday 30 April 2009
Pound strengthens against the US dollar on improved risk appetite
The pound strengthened against the dollar yesterday as risk aversion eased following a two-day flight to safety because of swine flu. Although the first death from the virus outside Mexico was confirmed yesterday morning, better-than-expected CBI retail sales data and solid demand at a UK gilt auction, both announced on Tuesday, eased investor worries that an economic recovery may yet be some way off. The auction of UK gilts was the first since UK Chancellor Alistair Darling’s budget announced last week, in which he announced a record issuance of £220 billion for the coming fiscal year. Also driving sterling’s gains yesterday morning was surprisingly positive consumer confidence and home price data released in the US on Tuesday, again adding to improved market sentiment and extending sterling’s gains in the morning.
However, far worse-than-expected US GDP data released at lunchtime clawed back some of sterling’s early gains. It revealed an annualised contraction in the US economy of 6.1% for the first three months of 2009, far worse than the 4.9% analysts had predicted. A 30% fall in exports was the primary driver behind the contraction, the biggest decline for 40 years, as the global recession reduced worldwide spending. The figure also represented the third consecutive quarter of contraction of the US economy, the first time there has been three in a row since 1975. Nevertheless, despite sterling losing some of its early gains, it remained in positive territory, buoyed by the strong performance of equity markets. The FTSE 100 finished the day up 93.9 points at 4189.59. Throughout the day, continued speculation over what measures the Fed would announce following their policy meeting slightly affected the market, although most analysts agreed that no major new initiatives would be announced. As it turned out, they were right, as the central bank kept interest rates on hold at virtually zero and continued as planned with its quantitative easing program, citing some tentative signs of economic recovery and strong equity market performance as the basis for their decision. The decision served only to further strengthen the pound’s position against the greenback, as investors speculated that there could be light at the end of the tunnel. Sterling finished the day at $1.4764.
In early trading today sterling has continued its rise against the greenback, as investors continue to take positive news from the Fed’s interest rate decision. There are lots of important announcements out today in both the US and the UK. In the former, the Month-on-Month and Year-on-Year Core Personal Consumer Expenditure Prices Index is out at 13.30 BST, as is March’s Personal Spending and Personal Consumption Expenditure Deflator data. Finally, at 14.45 BST, the Chicago Purchasing Managers’ Index for April is released. In the UK, Year-on-Year Nationwide House Prices data for March is due today.
However, far worse-than-expected US GDP data released at lunchtime clawed back some of sterling’s early gains. It revealed an annualised contraction in the US economy of 6.1% for the first three months of 2009, far worse than the 4.9% analysts had predicted. A 30% fall in exports was the primary driver behind the contraction, the biggest decline for 40 years, as the global recession reduced worldwide spending. The figure also represented the third consecutive quarter of contraction of the US economy, the first time there has been three in a row since 1975. Nevertheless, despite sterling losing some of its early gains, it remained in positive territory, buoyed by the strong performance of equity markets. The FTSE 100 finished the day up 93.9 points at 4189.59. Throughout the day, continued speculation over what measures the Fed would announce following their policy meeting slightly affected the market, although most analysts agreed that no major new initiatives would be announced. As it turned out, they were right, as the central bank kept interest rates on hold at virtually zero and continued as planned with its quantitative easing program, citing some tentative signs of economic recovery and strong equity market performance as the basis for their decision. The decision served only to further strengthen the pound’s position against the greenback, as investors speculated that there could be light at the end of the tunnel. Sterling finished the day at $1.4764.
In early trading today sterling has continued its rise against the greenback, as investors continue to take positive news from the Fed’s interest rate decision. There are lots of important announcements out today in both the US and the UK. In the former, the Month-on-Month and Year-on-Year Core Personal Consumer Expenditure Prices Index is out at 13.30 BST, as is March’s Personal Spending and Personal Consumption Expenditure Deflator data. Finally, at 14.45 BST, the Chicago Purchasing Managers’ Index for April is released. In the UK, Year-on-Year Nationwide House Prices data for March is due today.
Euro strengthens on improved risk appetite
The euro strengthened against the dollar yesterday, as risk appetite returned to markets following two days of investor flight to safe-haven currencies. Although much worse-than-expected annualised US GDP figures for the first three months for 2009 capped some of the single currency’s gains early in the afternoon, the euro remained strong throughout the day to finish the day up at $1.3271. Led by the biggest fall in US export demand in 40 years, a staggering 30%, the US economy contracted by 6.1% in the first quarter of this year. Nevertheless, appetite for the perceived riskier currencies remained in the market, buoyed by better-than-expected consumer confidence and house price data released in the US on Tuesday. The euro’s gains were also aided by an encouraging survey released by the European Commission, which showed that economic sentiment in the region improved to 67.2 points in April from 64.7 in March, much higher than the 65.2 points analysts had predicted.
Investor appetite for the riskier euro came despite news of the first death outside of Mexico from swine flu and also reports of more suspected cases around the world. After two days of swine-flu related falls, European equity markets rose yesterday as positive economic data, together with a feeling that there may have been an overreaction to the swine flu outbreak, eased investors’ nerves, further extending the euro’s gains against the greenback. In addition, speculation surrounding what the Fed would announce last night following their two-day monetary policy meeting affected markets, although, as expected, the US central bank kept their interest rate on hold at virtually zero and promised to continue with their purchasing of long-term government debt to expand the money supply as planned – a process known as quantitative easing. Investors took this news positively, concluding that the central bank’s current policies must be tentatively getting the US economy out of recession, and therefore they continued to buy into the euro yesterday evening.
In early trading today the euro has continued its rise against the greenback, as risk appetite improved. However, there are some big announcements in both the eurozone and America today which could move the market. In the US, March’s Personal Spending and Personal Consumption Expenditure Deflator data is released at 13.30 BST, as is the Month-on-Month and Year-on-Year Core Personal Consumer Expenditure Prices Index. In addition, at 14.45 BST, April’s Chicago Purchasing Managers’ Index is out. In the eurozone, the Unemployment Rate for March is released by the European Monetary Union at 10.00 BST.
Investor appetite for the riskier euro came despite news of the first death outside of Mexico from swine flu and also reports of more suspected cases around the world. After two days of swine-flu related falls, European equity markets rose yesterday as positive economic data, together with a feeling that there may have been an overreaction to the swine flu outbreak, eased investors’ nerves, further extending the euro’s gains against the greenback. In addition, speculation surrounding what the Fed would announce last night following their two-day monetary policy meeting affected markets, although, as expected, the US central bank kept their interest rate on hold at virtually zero and promised to continue with their purchasing of long-term government debt to expand the money supply as planned – a process known as quantitative easing. Investors took this news positively, concluding that the central bank’s current policies must be tentatively getting the US economy out of recession, and therefore they continued to buy into the euro yesterday evening.
In early trading today the euro has continued its rise against the greenback, as risk appetite improved. However, there are some big announcements in both the eurozone and America today which could move the market. In the US, March’s Personal Spending and Personal Consumption Expenditure Deflator data is released at 13.30 BST, as is the Month-on-Month and Year-on-Year Core Personal Consumer Expenditure Prices Index. In addition, at 14.45 BST, April’s Chicago Purchasing Managers’ Index is out. In the eurozone, the Unemployment Rate for March is released by the European Monetary Union at 10.00 BST.
New Zealand dollar weakens after rate cut
The New Zealand dollar weakened against the pound overnight and fell to a 7 week low against the aussie, after the Reserve Bank of New Zealand cut interest rates by 50 basis points, to a historic low of 2.5 percent. The central bank indicated in its statement that it would keep rates low until 2010 to help fight the country's deep recession. With expectations that Australian interest rates are nearing their bottom, the aussie yield attraction is now becoming much more attractive than the kiwi's. This essentially means foreign investors looking for riskier assets may start to defer to the aussie instead of the kiwi.
Australian dollar strengthens to 12-year high against the pound
The Australian dollar gained back ground against sterling yesterday, climbing to a 12-year high as a more optimistic tone in markets triggered greater demand for riskier assets. This was largely driven by the US central bank indicating the economic outlook was slightly better, coupled with signs of improved performances from banks. This was supported by strong results from Spanish banking giant Santander, which also owns a number of UK based banks including Abbey. The aussie also gained further support from improving metal prices, as fears have for now subsided over the impact of Swine flu. However, this may still come back into the equation if the pandemic starts to worsen dramatically.
Wednesday 29 April 2009
Federal Reserve's interest rate decision takes a back seat
Although ordinarily a big news event for investors, today’s interest rate decision by the Fed has been largely overshadowed this week by a variety of other stories. Ongoing concern surrounding the pig flu outbreak and investor jitters over big bank "stress tests", not to mention the upcoming assessment of the Obama administration’s first 100 days in office, has meant the Fed’s interest rate decision at 19.15 BST this evening has taken a back seat.
CaxtonFX analysts believe the Fed will keep interest rates on hold at the current range of 0% - 0.25% because, since their last meeting in March, there has been a mini-revival in equity markets. The central bank's decision to pump $1.2 trillion into the American economy by buying government debt has gone some way to boost lending, and is one of the reasons why many American banks were able to report better-than-expected first quarter results earlier this month. As a result, we believe this month’s meeting is more likely to be used to examine the effectiveness of policies already in place, rather than to announce any further rate cuts or new initiatives.
CaxtonFX analysts believe the Fed will keep interest rates on hold at the current range of 0% - 0.25% because, since their last meeting in March, there has been a mini-revival in equity markets. The central bank's decision to pump $1.2 trillion into the American economy by buying government debt has gone some way to boost lending, and is one of the reasons why many American banks were able to report better-than-expected first quarter results earlier this month. As a result, we believe this month’s meeting is more likely to be used to examine the effectiveness of policies already in place, rather than to announce any further rate cuts or new initiatives.
Pound continues to be undermined by swine flu outbreak
The pound weakened over a cent against the euro yesterday, as concerns over the severity of swine flu hit UK equity markets. The FTSE 100 closed down 70.61 points yesterday, or 1.7%, as travel, leisure and holiday stocks in particular took a pounding. Having suffered significant falls on Monday, British Airways, Carnival, Thomas Cook and TUI Travel all endured further losses yesterday, dropping between 1.7% and 5.4%. The pound started the day up against the euro, however, as better-than-expected retail survey results released by the Confederation of British Industry gave investors hope that a recovery may be underway. Their Distributive Trades Survey went positive for the first time this year, rising to +3 in April from -44 in March. The reading was the highest since January 2008 and was much better than the -40 many analysts were predicting, although they did admit the figures may be slightly skewed because of later Easter weekend this year. Also spurring the pound’s early gains yesterday was the news of strong demand at a UK gilt auction, the first since UK Chancellor Alistair Darling’s announcement last week that issuance would reach a record high of £220 billion for the fiscal year 2009/10.
However, sterling’s early gains were eventually wiped out as continued speculation surrounding the severity of the swine flu outbreak, as well as its potential global economic impact, weighed on equity markets. With Britain’s economy so dependent on banking and financial services, economists’ estimates that the world could lose up to $3 trillion in lost output should the outbreak turn into something more serious, would spell disaster for the country’s economic recovery. As a result, the euro strengthened further against the pound throughout yesterday afternoon, as the first case of the virus was confirmed in the UK and the death toll in Mexico rose to over 150.
In early trading today, the pound has recovered some of the losses it suffered yesterday, as speculation about how the European Central Bank intends to get the eurozone out of recession at their next policy meeting continued. An interest rate cut to 1% now appears increasingly likely, but whether the central bank intends to embark on a quantitative easing plan like the Fed and the Bank of England remains to be seen.
There are a few important pieces of data due in the eurozone this morning, with April’s Economic, Consumer and Industrial Confidence data all due at 10.00 BST from the European Monetary Union. The EMU is also set to release its Year-on-Year M3 data for March at the same time, a measure of the money supply released by the ECB.
However, sterling’s early gains were eventually wiped out as continued speculation surrounding the severity of the swine flu outbreak, as well as its potential global economic impact, weighed on equity markets. With Britain’s economy so dependent on banking and financial services, economists’ estimates that the world could lose up to $3 trillion in lost output should the outbreak turn into something more serious, would spell disaster for the country’s economic recovery. As a result, the euro strengthened further against the pound throughout yesterday afternoon, as the first case of the virus was confirmed in the UK and the death toll in Mexico rose to over 150.
In early trading today, the pound has recovered some of the losses it suffered yesterday, as speculation about how the European Central Bank intends to get the eurozone out of recession at their next policy meeting continued. An interest rate cut to 1% now appears increasingly likely, but whether the central bank intends to embark on a quantitative easing plan like the Fed and the Bank of England remains to be seen.
There are a few important pieces of data due in the eurozone this morning, with April’s Economic, Consumer and Industrial Confidence data all due at 10.00 BST from the European Monetary Union. The EMU is also set to release its Year-on-Year M3 data for March at the same time, a measure of the money supply released by the ECB.
Pound finishes slightly down against the US dollar
The pound weakened slightly against the dollar yesterday, as concern about the severity of the swine flu outbreak reduced investor risk appetite. Investor jitters over the potential economic impact of a global pandemic were exacerbated yesterday morning following comments by the deputy chief of the World Health Organisation, Keiji Fukuda, who said the virus could no longer be contained and countries should focus on mitigating its effects. His remarks resulted in widespread falls in European equity markets, with travel, holiday and leisure stocks all taking a particular hit. The news that holiday operators Thomson and First Choice have cancelled all their flights to Mexico due to the outbreak only increased investor appetite for safe-haven currencies like the dollar. This risk aversion was further aided by concerns about the US banking sector’s capital needs, as an article in The Wall Street Journal claimed that Citigroup and Bank of America may need to raise more capital based on early results of government “stress tests” on banks. The formal results of the tests are not due until May 4th, however early indications show the banks need to fill capital shortfalls so as not to rely on any more government funds. Both Bank of America and Citigroup have already received $45 billion bailouts from the US taxpayer, and could require more according to preliminary results of the tests. A steady stream of dire financial news from the banking sector has battered the pound in recent months, given the economy’s dependence on financial services, and consequently the possibility that more bad news may be round the corner meant investors looked to sell sterling to reduce risk. Elsewhere, news that BP’s first quarter profits fell by 62% to £1.64 billion because of low oil prices did little to ease risk aversion.
Later in the day, data released in the US showing prices of single-family homes dropped by 18.6% in February from a year ago received mixed reactions from the market. Although the figure remains negative, it did indicate that the pace of decline may have slowed and therefore the US property market could be bottoming out. The Standard & Poor’s/Case-Shiller Home Price Index also showed the composite index of 20 metropolitan areas fell 2.2% in February from the previous month. This news induced a brief rally for the pound, aided by better-than-expected Consumer Confidence data released by the Conference Board in the US. April’s figure of 39.2 was much better than the 29.8 analysts were predicting and also showed a positive improvement on the 26.9 registered in March. Sterling’s afternoon recovery was also aided by much better-than-expected UK retail sales figures released by the Confederation of British Industry. Its Distributive Trades Survey showed a rise to +3 in April from -44 in March, the first positive reading in a year and much better than the -40 analysts had predicted. The figure gave investors renewed hope that the UK may be tentatively coming out of recession, although the CBI did admit the figures could be slightly misleading because of a later Easter weekend this year.
Sterling’s gains were eventually wiped out late in the day, however, as news that the swine flu virus had spread as far afield as Israel and New Zealand weighed on equity markets. The FTSE 100 closed the day down 1.7% at 4096.4, with the pound finishing slightly down against the dollar at $1.4632.
There are some very important pieces of data out in the US today. At 13.30 BST, annualised American GDP data is released, whilst at 19.15 BST the Federal Reserve’s interest rate decision for April is due. Also at that time, The Federal Open Market Committee’s Minutes will be released to the market, with investors eyeing them closely to try and determine where future US interest rate policy is headed. CaxtonFX analysts predict the Fed will not change interest rates from their current 0.25% level, however they may announce an expansion of their quantitative easing program.
Later in the day, data released in the US showing prices of single-family homes dropped by 18.6% in February from a year ago received mixed reactions from the market. Although the figure remains negative, it did indicate that the pace of decline may have slowed and therefore the US property market could be bottoming out. The Standard & Poor’s/Case-Shiller Home Price Index also showed the composite index of 20 metropolitan areas fell 2.2% in February from the previous month. This news induced a brief rally for the pound, aided by better-than-expected Consumer Confidence data released by the Conference Board in the US. April’s figure of 39.2 was much better than the 29.8 analysts were predicting and also showed a positive improvement on the 26.9 registered in March. Sterling’s afternoon recovery was also aided by much better-than-expected UK retail sales figures released by the Confederation of British Industry. Its Distributive Trades Survey showed a rise to +3 in April from -44 in March, the first positive reading in a year and much better than the -40 analysts had predicted. The figure gave investors renewed hope that the UK may be tentatively coming out of recession, although the CBI did admit the figures could be slightly misleading because of a later Easter weekend this year.
Sterling’s gains were eventually wiped out late in the day, however, as news that the swine flu virus had spread as far afield as Israel and New Zealand weighed on equity markets. The FTSE 100 closed the day down 1.7% at 4096.4, with the pound finishing slightly down against the dollar at $1.4632.
There are some very important pieces of data out in the US today. At 13.30 BST, annualised American GDP data is released, whilst at 19.15 BST the Federal Reserve’s interest rate decision for April is due. Also at that time, The Federal Open Market Committee’s Minutes will be released to the market, with investors eyeing them closely to try and determine where future US interest rate policy is headed. CaxtonFX analysts predict the Fed will not change interest rates from their current 0.25% level, however they may announce an expansion of their quantitative easing program.
US dollar weakens as better consumer confidence data helps risk appetite
The dollar weakened against the euro yesterday due to a better than expected consumer confidence report and more positive house price data. This resulted in an increase in investors’ risk appetite, thus weakening the dollar as the main safe haven currency. The euro benefited from US data showing a surprise jump in consumer confidence in April, in the most positive reading of the US Conference Board index since last November. The index, based on a representative sample of 5,000 US households, leapt to 39.2, up from an amended 26.9 in March. Most analysts had predicted a more modest rise to 29.9. Other data also showed an easing of the pace of decline in home prices in major US cities in February. The Standard & Poor's/Case-Shiller report was consistent with other data suggesting stabilisation in the US housing market after two horrific years.
The euro also rose on the back of comments made by ECB board member Lorenzo Bini Smaghi, who indicated that quantitative easing measures have not been conclusively determined as of yet, and it may be that the ECB only cuts interest rates by 25 basis points at their next meeting on May 7, as opposed to also introducing non conventional measures to combat the recession.
Nevertheless, the dollar’s losses were limited due to continuing fears regarding the global outbreak of swine flu. Moody’s stated yesterday that the global macroeconomic impact of the flu could reduce global GDP by £225.6bn and the outbreak also adversely affected the FTSE 100, which closed down 1.7 percent at 40996.4. Additionally, concerns have arisen regarding stress tests for major US banks. It was leaked ahead of the official release that Citigroup and Bank of America are likely to be forced to boost their capital levels in advance of the stress tests, so a further bailout may be required. The tests themselves are due to be announced on May 4 and are designed to conclude whether banks can withstand further grim economic activity without collapsing.
Investors are now awaiting the outcome of a two-day meeting of the US Federal Reserve this evening, where monetary policymakers are expected to keep boosting the supply of cheap credit to the ailing US economy since slashing its base interest rate to virtually zero. Also on the US calendar is the government's first estimate of gross domestic product for the first quarter, expected to show an annualised 4.9 per cent contraction after the fourth-quarter drop of 6.3 per cent.
Other announcements taking place in the US today include MBA Mortgage Appplications. In the eurozone economic confidence, consumer confidence and industrial confidence will be released today.
The euro also rose on the back of comments made by ECB board member Lorenzo Bini Smaghi, who indicated that quantitative easing measures have not been conclusively determined as of yet, and it may be that the ECB only cuts interest rates by 25 basis points at their next meeting on May 7, as opposed to also introducing non conventional measures to combat the recession.
Nevertheless, the dollar’s losses were limited due to continuing fears regarding the global outbreak of swine flu. Moody’s stated yesterday that the global macroeconomic impact of the flu could reduce global GDP by £225.6bn and the outbreak also adversely affected the FTSE 100, which closed down 1.7 percent at 40996.4. Additionally, concerns have arisen regarding stress tests for major US banks. It was leaked ahead of the official release that Citigroup and Bank of America are likely to be forced to boost their capital levels in advance of the stress tests, so a further bailout may be required. The tests themselves are due to be announced on May 4 and are designed to conclude whether banks can withstand further grim economic activity without collapsing.
Investors are now awaiting the outcome of a two-day meeting of the US Federal Reserve this evening, where monetary policymakers are expected to keep boosting the supply of cheap credit to the ailing US economy since slashing its base interest rate to virtually zero. Also on the US calendar is the government's first estimate of gross domestic product for the first quarter, expected to show an annualised 4.9 per cent contraction after the fourth-quarter drop of 6.3 per cent.
Other announcements taking place in the US today include MBA Mortgage Appplications. In the eurozone economic confidence, consumer confidence and industrial confidence will be released today.
New Zealand dollar weakens ahead of RBNZ rate decision
The New Zealand dollar weakened against the aussie and the pound yesterday, as investors brace for an interest rate cut from the Reserve Bank of New Zealand at this evening's meeting. The market is currently pricing in a 50 basis point cut to 2.5%, with possible further deductions to follow later in the year.
Australian dollar consolidates
The Australian dollar consolidated from recent weakness against sterling yesterday, after offshore data was not as worse as forecast. However, investor sentiment remains fragile, with the Swine flu and continuing concerns over the banking sector making investors reluctant to take on higher risk currencies such as the aussie. Commodity prices also remain weak, which is likely to weigh on the aussie. Markets are likely to wait and see what the consequences of the Swine flu are, and whether it will be upgraded to a pandemic; this would likely cause further risk aversion, but if the virus is contained risk aversion will probably fade quite rapidly.
Tuesday 28 April 2009
Pound makes gains against the euro
The pound strengthened against the euro yesterday, as investor wariness over what the ECB intends to do at their next policy meeting on May 7th reduced appetite for the single currency. Early in the day the pound weakened against the euro, despite news over the weekend that Spain’s unemployment rate had reached 17.4% at the end of March, double what it was this time last year. Investors appeared more wary of the dire state of the UK’s public finances early on, particularly as it was revealed on Friday that the British economy shrank by a worse-than-expected 1.9% for the first three months of 2009. As a result, increased investor scepticism over UK Chancellor Alistair Darling’s optimistic growth forecasts announced in the budget last week, as well as the country’s ability to service its ballooning public debt, led many to dump sterling in early trading and look elsewhere. This initial strengthening of the single currency came despite worse-than-expected figures released by Destatis in Germany that Year-on-Year Import Price Index for March had fallen by 7.1%. Soon after lunch, however, sterling rallied against the euro, despite news of a drop in the number of mortgages approved in March. Figures released by the British Bankers’ Association showed the number of mortgages approved by the UK’s major banks fell to 26,097 in March, 47% down from the same time last year. The drop was the first in four months, fuelling fears among investors that a UK housing market recovery may still be some way off.
Nevertheless, despite this news sterling strengthened against the euro in afternoon trading as investors looked warily ahead to the European Central Bank’s next monetary policy meeting on May 7th. It now appears increasingly likely that the bank will cut interest rates by a further 25 basis points to 1%, but what is less clear is whether the central bank intends to copy the Fed and Bank of England by implementing a quantitative easing program to help boost the recession-hit eurozone economy. The euro finished the day down at 1.1231 from 1.1082.
In early trading today, the pound has weakened against the euro as fears over the extent of the swine flu outbreak continue. Yesterday, global equity markets were hit as investors dumped travel stocks on the basis that a possible pandemic would reduce global travel. The knock-on effect of a widespread outbreak could have devastating effects on the global economy, with some economists estimating that the world could lose $3 trillion in lost output. With the UK economy so dependent on banking and the financial services, this could have devastating effects on the country’s economic recovery, and therefore investors may start to look beyond sterling in the coming days to reduce risk. There are no major announcements in the UK or eurozone today, however many will be following news of the swine flu outbreak to see if it gets any worse.
Nevertheless, despite this news sterling strengthened against the euro in afternoon trading as investors looked warily ahead to the European Central Bank’s next monetary policy meeting on May 7th. It now appears increasingly likely that the bank will cut interest rates by a further 25 basis points to 1%, but what is less clear is whether the central bank intends to copy the Fed and Bank of England by implementing a quantitative easing program to help boost the recession-hit eurozone economy. The euro finished the day down at 1.1231 from 1.1082.
In early trading today, the pound has weakened against the euro as fears over the extent of the swine flu outbreak continue. Yesterday, global equity markets were hit as investors dumped travel stocks on the basis that a possible pandemic would reduce global travel. The knock-on effect of a widespread outbreak could have devastating effects on the global economy, with some economists estimating that the world could lose $3 trillion in lost output. With the UK economy so dependent on banking and the financial services, this could have devastating effects on the country’s economic recovery, and therefore investors may start to look beyond sterling in the coming days to reduce risk. There are no major announcements in the UK or eurozone today, however many will be following news of the swine flu outbreak to see if it gets any worse.
Pound weakens as investors seek safe-haven of the US dollar
The pound weakened slightly against the dollar yesterday following fears that an outbreak of swine flu in Mexico could turn into a global pandemic. As a result, investors took pre-emptive action by dumping travel and leisure stocks, with British Airways share price finishing the day down 7.4%, whilst travel group Thomas Cook lost 4.3%. Top economists fear that in the worst case scenario, a swine flu pandemic could cost the world economy $3 trillion in lost output, equivalent to 4.8% of world GDP, significantly hampering a global economic recovery. As a result, investors dumped sterling in favour of the perceived safety of the greenback in order to reduce their exposure.
In early trading, sterling lost ground against the dollar as concerns surrounding the UK’s ballooning debt and struggling economy continued. As revealed on Friday, the British economy shrank by 1.9% in the first three months of 2009, the biggest fall since the third quarter of 1979 and much worse than the 1.5% contraction analysts predicted. The figure cast fresh doubt over Chancellor Alistair Darling’s growth forecasts announced in his budget last Wednesday, predicting an optimistic 1.25% growth next year and 3.5% in 2011. In addition, Mr. Darling’s announcement that the UK will run a budget deficit of 12.4% of GDP for the coming fiscal year, as well as issue a record £220 billion of gilts, has continued to weigh on investors’ mind and, as a result, they have looked to the perceived safe-haven of the dollar to reduce risk. Later in the day, news that there were suspected cases of swine flu in the UK, Canada and elsewhere further exacerbated this flight to safety. Moreover, property data company Hometrack’s monthly report for April did little to cheer investors, as it confirmed house prices in England and Wales fell by 10.1% compared with a year ago, a modest improvement on the 10.3% fall in March. Although the markets largely shrugged off this data, it no doubt contributed to the weakening of the pound against the dollar as again investors looked to the perceived safety of the greenback to reduce risk.
Investor risk aversion also increased following comments by Lawrence Summers, director of the White House National Economic Council, who said the US economy will experience “sharp declines in employment for quite some time this year,” on Sunday night’s Fox News Sunday. His assessment came just two days before a crucial report in the US is due, which analysts expect to show a 4.7% contraction in the world’s largest economy in the first quarter of 2009. There was also further disappointing news in the UK property market later in the day, as a Mortgage Approvals report released by the British Bankers’ Association (BBA) showed the first drop in mortgage lending by the country’s major banks for four months in March. The number of mortgages approved for house purchases last month fell 6.8% from February to 26,097, although the BBA did say they expected fluctuations during a recession. Nevertheless, more negative news from the housing market did little to improve investor confidence that it may be on the cusp of a recovery, and together with concerns over the severity of the swine flu outbreak and the other data released throughout the day, the news caused sterling to weaken against the dollar, finishing the day at $1.4646.
There is an important Consumer Confidence survey due in the US today at 15.00 BST, however all eyes are likely to be on the swine flu story today to see if there are any more confirmed cases.
In early trading, sterling lost ground against the dollar as concerns surrounding the UK’s ballooning debt and struggling economy continued. As revealed on Friday, the British economy shrank by 1.9% in the first three months of 2009, the biggest fall since the third quarter of 1979 and much worse than the 1.5% contraction analysts predicted. The figure cast fresh doubt over Chancellor Alistair Darling’s growth forecasts announced in his budget last Wednesday, predicting an optimistic 1.25% growth next year and 3.5% in 2011. In addition, Mr. Darling’s announcement that the UK will run a budget deficit of 12.4% of GDP for the coming fiscal year, as well as issue a record £220 billion of gilts, has continued to weigh on investors’ mind and, as a result, they have looked to the perceived safe-haven of the dollar to reduce risk. Later in the day, news that there were suspected cases of swine flu in the UK, Canada and elsewhere further exacerbated this flight to safety. Moreover, property data company Hometrack’s monthly report for April did little to cheer investors, as it confirmed house prices in England and Wales fell by 10.1% compared with a year ago, a modest improvement on the 10.3% fall in March. Although the markets largely shrugged off this data, it no doubt contributed to the weakening of the pound against the dollar as again investors looked to the perceived safety of the greenback to reduce risk.
Investor risk aversion also increased following comments by Lawrence Summers, director of the White House National Economic Council, who said the US economy will experience “sharp declines in employment for quite some time this year,” on Sunday night’s Fox News Sunday. His assessment came just two days before a crucial report in the US is due, which analysts expect to show a 4.7% contraction in the world’s largest economy in the first quarter of 2009. There was also further disappointing news in the UK property market later in the day, as a Mortgage Approvals report released by the British Bankers’ Association (BBA) showed the first drop in mortgage lending by the country’s major banks for four months in March. The number of mortgages approved for house purchases last month fell 6.8% from February to 26,097, although the BBA did say they expected fluctuations during a recession. Nevertheless, more negative news from the housing market did little to improve investor confidence that it may be on the cusp of a recovery, and together with concerns over the severity of the swine flu outbreak and the other data released throughout the day, the news caused sterling to weaken against the dollar, finishing the day at $1.4646.
There is an important Consumer Confidence survey due in the US today at 15.00 BST, however all eyes are likely to be on the swine flu story today to see if there are any more confirmed cases.
Euro loses ground to the US dollar
The euro weakened against the US dollar yesterday as investors flocked to the safe haven of the dollar, predominantly due to fears arising over the global outbreak of swine flu. World health officials said yesterday that the virus was suspected in up to149 deaths in Mexico, with more than 1,600 cases reported, while 50 cases — none fatal — were confirmed in the United States, six in Canada and several in Europe, including 2 in the UK.
Shares in travel companies were worst hit by the outbreak of swine flu, with Thomas Cook, TUI, British Airways, Intercontinental and Carnival all trading sharply lower on fears that travel plans will be affected by concerns of the epidemic becoming a pandemic. But London fought back from early swine flu-related losses to track Wall Street higher on hopes a new restructuring plan from GM will help it avoid bankruptcy. However, worries have arisen that automaker Chrysler could be filing for bankruptcy if it does not agree a deal with Fiat by April 30.
Data released in the eurozone yesterday saw the German May GfK consumer sentiment index remain steady at 2.5, but riskier currencies came under pressure because of media reports about the extent of the toxic asset problem in German banks, and growing attention on public debt in countries such as the UK.
Investors are now eagerly awaiting the final outcome of the US Federal Reserve’s meeting taking place today and tomorrow, as well as quarterly earnings released by major banks. Investors also await the outcome of stress tests for US banks, scheduled to be announced next week. The tests involve a capital buffer to assist banks in overcoming a 3.3% economic contraction in 2009. Additionally, the ECB will be announcing their interest rate decision on May 7 where they are expected to cut interest rates by 25 basis points and possibly announce quantitative easing measures to combat the recession.
There are several announcements taking place in the US today, including S&P/Case-Shiller Home Price Indices, Consumer Confidence, Richmond Fed Manufacturing Index and ABC/Washington Post Consumer Confidence. There are no significant announcements taking place in the euro zone today.
Shares in travel companies were worst hit by the outbreak of swine flu, with Thomas Cook, TUI, British Airways, Intercontinental and Carnival all trading sharply lower on fears that travel plans will be affected by concerns of the epidemic becoming a pandemic. But London fought back from early swine flu-related losses to track Wall Street higher on hopes a new restructuring plan from GM will help it avoid bankruptcy. However, worries have arisen that automaker Chrysler could be filing for bankruptcy if it does not agree a deal with Fiat by April 30.
Data released in the eurozone yesterday saw the German May GfK consumer sentiment index remain steady at 2.5, but riskier currencies came under pressure because of media reports about the extent of the toxic asset problem in German banks, and growing attention on public debt in countries such as the UK.
Investors are now eagerly awaiting the final outcome of the US Federal Reserve’s meeting taking place today and tomorrow, as well as quarterly earnings released by major banks. Investors also await the outcome of stress tests for US banks, scheduled to be announced next week. The tests involve a capital buffer to assist banks in overcoming a 3.3% economic contraction in 2009. Additionally, the ECB will be announcing their interest rate decision on May 7 where they are expected to cut interest rates by 25 basis points and possibly announce quantitative easing measures to combat the recession.
There are several announcements taking place in the US today, including S&P/Case-Shiller Home Price Indices, Consumer Confidence, Richmond Fed Manufacturing Index and ABC/Washington Post Consumer Confidence. There are no significant announcements taking place in the euro zone today.
New Zealand dollar has mixed day
The New Zealand dollar had a mixed day, gaining ground against the aussie but losing some ground to the pound. The Swine flu pandemic dominated trading overnight. Markets will continue to remain focused on Thursday’s Reserve Bank of New Zealand rate decision, with investors expecting a 50 basis point rate cut. The central bank’s statement will also be eyed for clues on how long interest rates will remain at a low level.
Australian dollar undermined by fears over swine flu
The Australian dollar weakened against sterling yesterday, as fears the swine flu virus may spread globally saw yet another threat which could hinder a world economic recovery. The aussie relies heavily on commodities for its export income and usually remains vulnerable to possible threats to world trade. The flu virus caused higher risk aversion, which has generally overridden economic data. UK figures released revealed house prices in the UK fell by 10.1 percent in April compared to 12 month ago.
Monday 27 April 2009
Pound undermined by outbreak of swine flu
A deadly outbreak of swine flu has killed more than 100 people in Mexico, with infections reported in the US, Canada and possibly six other countries. Uncertainty over the scale of the outbreak has cranked up risk aversion, hitting higher-yield currencies like the euro and sterling, whilst at the same time boosting the dollar and the yen as a safe-haven play. Global equity markets have also been affected by the outbreak this morning, with airline, holiday and leisure stocks all taking a particular hit. It would appear that only once the extent of the outbreak is known, or authorities start to bring it under control, will investor jitters on this issue subside.
Pound loses ground to euro following worse than expected GDP
The pound weakened against the euro on Friday, as improved investor confidence in the eurozone increased appetite for the single currency. In Germany, the IFO Business Climate index survey showed a better-than-expected rise to 83.7 in April, up from 82.2 the previous month, fuelling investor confidence that the eurozone may be coming tentatively out of recession. In the UK, GDP figures released by the Office of National Statistics showing that the economy had shrunk by 1.9% in the first quarter of 2009 further called into question Chancellor Alistair Darling’s optimistic growth forecasts, announced in his budget last Wednesday. The Chancellor predicted that the UK economy would grow by 1.25% next year and 3.5% in 2011, but the worse-than-expected GDP data cast fresh doubt over his predictions. It represented the biggest quarterly decline in the UK’s GDP in thirty years, and the country’s third consecutive quarter of negative growth, prompting investors to dump sterling as their confidence that the UK may be coming out of recession dwindled. There was also continued doubt in the City over the credibility of the Chancellor’s new 50% tax rate on those earning £150,000 or more, with many fearing that the top financial services talent will look elsewhere to ply their trade. With the UK economy so dependent on the banking and financial services industry, some analysts worried over the long-term implications of such a tax rise, potentially making it much harder for the UK to get out of recession going forward. As a result of these investor jitters, together with improved investor sentiment in the eurozone, sterling weakened against the single currency over the day, finishing at 1.1082, down from 1.1198 at the start of the session.
In early trading today, the pound has continued to weaken against the euro ahead of important housing data released later today. The Nationwide Housing Price figures are expected to report a further 15.8% fall Year-on-Year for April, fuelling fears that the UK housing market may have some way to go before it bottoms out. In the eurozone, President of the European Central Bank Jean Claude Trichet’s speech at 17.45 BST will be of particular importance to investors as he may give some indication of what steps the bank intends to take at the next meeting.
In early trading today, the pound has continued to weaken against the euro ahead of important housing data released later today. The Nationwide Housing Price figures are expected to report a further 15.8% fall Year-on-Year for April, fuelling fears that the UK housing market may have some way to go before it bottoms out. In the eurozone, President of the European Central Bank Jean Claude Trichet’s speech at 17.45 BST will be of particular importance to investors as he may give some indication of what steps the bank intends to take at the next meeting.
Pound undermined by worse than expected GDP figures
The pound weakened against the dollar on Friday, wiping out much of the bounce it enjoyed the day before. In early trading, the pound lost ground against the dollar following an article in The Daily Telegraph suggesting the UK could lose its AAA credit rating after rating agencies outlined their concerns over the UK’s ability to service its public debt. If the UK were to suffer the embarrassment of having its rating downgraded the cost of sovereign borrowing would increase, making future tax and interest rate rises more likely. The pound then suffered furthered losses against the greenback after figures released by the Office of National Statistics showed the UK economy had shrunk 1.9% in the first three months of 2009. The figure was much worse than the 1.5% contraction analysts had predicted, and represented the biggest decline in GDP since the third quarter of 1979. It was the UK’s third consecutive quarter of negative GDP growth, confirming that the country remains mired in deep recession. The worse-than-expected figures cast fresh doubt over UK Chancellor Alistair Darling’s optimistic growth forecasts announced in the budget last Wednesday, and therefore many investors sold sterling in favour of the perceived safe-haven of the US dollar.
Later in the day, however, better-than-expected US Durable Goods Orders data, down at -0.8% rather than the predicted -1.4%, sparked a rally for the pound as investors’ appetite for risk improved. The pound’s recovery was also aided by overseas central banks and model funds buying into the currency as part of their regular reserves management. However, worse-than-expected housing data eventually cancelled out sterling’s gains as investors realised the US economy may yet have further to contract. Month-on-month New Home data released by the US Census Bureau revealed that sales of single-family homes in March decreased by 0.6% to a seasonally adjusted annual rate of 356,000 in comparison to February. The decline was the fifth in six months and added to investor wariness that the all-important US housing market may yet have further to fall. This news, together with other data released during the day, meant the pound finished down against the dollar at $1.4676, having started the day at $1.4721.
In early trading today, the pound has weakened markedly against the dollar as investors brace themselves ahead of the release of important UK Nationwide House Price data, expected to show a fall of 15.8% Year-on-Year for April. There are no major announcements in the US today.
Later in the day, however, better-than-expected US Durable Goods Orders data, down at -0.8% rather than the predicted -1.4%, sparked a rally for the pound as investors’ appetite for risk improved. The pound’s recovery was also aided by overseas central banks and model funds buying into the currency as part of their regular reserves management. However, worse-than-expected housing data eventually cancelled out sterling’s gains as investors realised the US economy may yet have further to contract. Month-on-month New Home data released by the US Census Bureau revealed that sales of single-family homes in March decreased by 0.6% to a seasonally adjusted annual rate of 356,000 in comparison to February. The decline was the fifth in six months and added to investor wariness that the all-important US housing market may yet have further to fall. This news, together with other data released during the day, meant the pound finished down against the dollar at $1.4676, having started the day at $1.4721.
In early trading today, the pound has weakened markedly against the dollar as investors brace themselves ahead of the release of important UK Nationwide House Price data, expected to show a fall of 15.8% Year-on-Year for April. There are no major announcements in the US today.
Euro continues its rise against the US dollar
The euro continued its rise against the dollar on Friday, finishing at $1.3240 up from $1.3142 at the start of the day. In early trading, the euro rose against the dollar after a key survey of German business confidence indicated tentative signs of recovery in the eurozone economy. April’s IFO Business Climate index survey showed a rise to 83.7 from 82.2 the previous month, much higher than the 82.3 analysts expected. As a result, investor risk aversion weakened and they bought into the euro, taking it to a one-week high against the greenback. This shift in favour of the single currency was also aided by the announcement that French consumer spending for April was stronger than expected. In the US, ongoing concerns over government stress tests on US banks further contributed to the euro’s gains over the dollar, as investor jitters over whether there may be further bad news to come weighed on their minds.
Interestingly, Ford’s admission that they had lost $1.43bn in the first quarter of 2009 did little to dissuade investors from buying into riskier currencies, primarily because that was far less than the $7.2 billion the company had lost in the last three months of 2008. It is now targeting 2011 to break even. The dollar’s slide against the euro was further extended after better-than-expected data released by the US Census Bureau reduced investors’ risk aversion. Their Durable Goods Orders data for March stood at -0.8%, much higher than analysts had predicted, and therefore investors looked beyond the perceived safe-haven currencies. Worse-than-expected property data from the US did little to stem the euro’s gains, despite signs that the housing market continues to slow. New Home Sales in March were reported at -0.6%, far weaker than the 0.9% growth predicted by analysts.
In early trading today the euro has pared some of the gains it made last week, following news over the weekend that Spain’s unemployment rate hit 17.4% at the end of March, double this time last year. There is also wariness in the market ahead of the President of the European Central Bank’s speech at 17.45 BST today. Investor’s will be studying Jean Claude Trichet’s words carefully as they try to decipher what measures he intends to implement to get the eurozone out of recession. As a result, there has been a flight to the perceived safe-haven of the greenback this morning as investors look to reduce risk. There are no major announcements due in the US today.
Interestingly, Ford’s admission that they had lost $1.43bn in the first quarter of 2009 did little to dissuade investors from buying into riskier currencies, primarily because that was far less than the $7.2 billion the company had lost in the last three months of 2008. It is now targeting 2011 to break even. The dollar’s slide against the euro was further extended after better-than-expected data released by the US Census Bureau reduced investors’ risk aversion. Their Durable Goods Orders data for March stood at -0.8%, much higher than analysts had predicted, and therefore investors looked beyond the perceived safe-haven currencies. Worse-than-expected property data from the US did little to stem the euro’s gains, despite signs that the housing market continues to slow. New Home Sales in March were reported at -0.6%, far weaker than the 0.9% growth predicted by analysts.
In early trading today the euro has pared some of the gains it made last week, following news over the weekend that Spain’s unemployment rate hit 17.4% at the end of March, double this time last year. There is also wariness in the market ahead of the President of the European Central Bank’s speech at 17.45 BST today. Investor’s will be studying Jean Claude Trichet’s words carefully as they try to decipher what measures he intends to implement to get the eurozone out of recession. As a result, there has been a flight to the perceived safe-haven of the greenback this morning as investors look to reduce risk. There are no major announcements due in the US today.
New Zealand makes gains against the pound
The New Zealand dollar finished the week stronger against both sterling and the aussie, however offshore trading has seen the kiwi weaken and open lower against both. The Reserve Bank of New Zealand’s decision on Thursday will take centre stage this week, with markets predicting a 50 basis point cut.
Australian dollar makes substantial gains against sterling
The Australian dollar appreciated heavily against sterling on Friday, after data showed the UK economy’s fall in the first quarter was its fastest in 30 years. Britain’s first quarter gross domestic product fell 4.1% year on year, the biggest annual drop since 1979. The latest figures mean that GDP has now shrunk for three quarters in a row, and confirm that the economy is still deep in recession. Sterling also came under pressure after The Telegraph newspaper reported that ratings agencies were concerned about Britain’s rising debt levels. Earlier last week, the government said that the national debt would reach 1.4 trillion pounds during the next five years.
Friday 24 April 2009
Pound falls to 12-year low against the Australian dollar
Sterling dropped to a 12-year low against the Australian dollar this afternoon, as the release of worse-than-expected GDP figures in the UK undermined the pound. Gross Domestic Product data released this morning showed the British economy contracted by 1.9% in the first quarter, compared to a projected contraction of 1.5%.
The Australian dollar was also helped by rising equity markets, while the pound has been weighed down by a newspaper article highlighting risks to Britain's sovereign credit rating.
The Australian dollar was also helped by rising equity markets, while the pound has been weighed down by a newspaper article highlighting risks to Britain's sovereign credit rating.
Pound hit by bigger than expected contraction in GDP
The pound has weakened notably against the euro and the dollar this morning after first quarter GDP figures showed the UK economy has shrunk by 1.9%. Analysts had predicted that the economy would contract by 1.5%, so the news is much worse than anticipated. To give it some historical context, today's fall is the biggest quarterly decline in GDP since the third quarter of 1979.
This is now the third quarter of negative growth in GDP, confirming that the British economy remains in deep recession. The biggest factor in the contraction is the decline in the manufacturing sector, which shrank 6.2% in the first three months of the year, having fallen 4.9% in the previous quarter. There appears to be a fresh flight to safe-haven currencies from the pound as renewed scrutiny of Chancellor Alistair Darling's growth forecasts begins. As well as the dollar, another safe-haven currency, the Yen, has also been particularly favoured by investors.
This is now the third quarter of negative growth in GDP, confirming that the British economy remains in deep recession. The biggest factor in the contraction is the decline in the manufacturing sector, which shrank 6.2% in the first three months of the year, having fallen 4.9% in the previous quarter. There appears to be a fresh flight to safe-haven currencies from the pound as renewed scrutiny of Chancellor Alistair Darling's growth forecasts begins. As well as the dollar, another safe-haven currency, the Yen, has also been particularly favoured by investors.
Pound bounces off lows against the euro
The pound bounced off the lows we saw on Wednesday, as investors took advantage of buying the pound at relatively cheap levels. However, the gains we saw were modest as concerns surround the mounting debt problems the UK is facing up to – indeed the UK may be in danger of losing its AAA credit rating after rating agencies expressed their doubts about Britain’s ability to cope with its public debt. If the UK were to suffer the embarrassment of having its rating downgraded – following Ireland, Spain, Portugal, and Greece who have already suffered downgrades – it would increase the cost of sovereign borrowing, making it more than likely interest rates and taxes would have to go up. In other news, it was confirmed that Britain’s manufacturing output suffered its sharpest decline in the first quarter of this year since records began in 1975. Within the eurozone, industrial new orders came in slightly better than expected, but they are still at historically very low levels.
In early trading today, the pound is back under selling pressure in anticipation of GDP figures released in the UK this morning. We are expecting to see that the UK’s economy has contracted by 1.5% in the first quarter of this year – the third consecutive quarter of contraction. In addition to this, retail sales figures are being released giving an indication of how consumers are fairing in the economic slowdown. IFO release their business climate and expectations survey within Germany this morning.
In early trading today, the pound is back under selling pressure in anticipation of GDP figures released in the UK this morning. We are expecting to see that the UK’s economy has contracted by 1.5% in the first quarter of this year – the third consecutive quarter of contraction. In addition to this, retail sales figures are being released giving an indication of how consumers are fairing in the economic slowdown. IFO release their business climate and expectations survey within Germany this morning.
Pound strengthens against the US dollar
In a quiet day’s trading, the pound strengthened against the dollar yesterday as some investors bought sterling to take advantage of Wednesday’s fall. However, these gains were capped as investors continued to digest Chancellor Alistair Darling’s gloomy budget. He revealed that the UK will run a budget deficit of 12.4% of GDP and have to issue a record £220 billion of gilts for the 2009/10 fiscal year. Following his speech, the pound fell to a three-week low against the dollar, although it recovered to some extent yesterday as investors’ risk aversion calmed.
The pound’s recovery was aided by some positive news from Bank of England policymaker David Blanchflower, who said he could see some tentative signs of recovery in the UK economy. There were also some strong results released by Debenhams who reported half-year profits of £104.2million, causing a surge in retail shares. In addition, Barclays Chief Executive John Varley confirmed that the bank had made a positive start to the year, adding it would lend an extra £11 billion to British households and businesses this year. Finally, a slow in the decline of British factory orders in April from the previous month also improved investor sentiment, although they remained wary of the state of the British economy following revelations that there is a £90 billion black hole at the heart of Alistair Darling’s budget which may require £45 billion of tax hikes and spending cuts over the coming years. The City also reacted negatively to the news that a new 50% tax rate for those earning £150,000 or more is set to be introduced, prompting fears that the UK may no longer be an attractive place to do business in the future.
In America, a report by the National Association of Realtors showing a fall of 3% in the pace of existing home sales to a much lower-than-expected annual rate of 4.57 million units shook investor confidence, as did uncertainty before US regulators reveal their stress test methodology against American banks later today.
In early trading today, the pound has weakened against the dollar ahead some important data released on both sides of the Atlantic. In the UK, Year-on-Year and Quarter-on-Quarter GDP figures are released at 9.30 BST and are expected to show that UK growth has contracted by 1.5% in the first quarter. Important UK Retail Sales data is also due for release at the same time. In America, New Home Sales and Durable Goods Orders data is out 13.30 BST and 15.00 BST respectively, with both expected to affect the dollar’s performance today.
The pound’s recovery was aided by some positive news from Bank of England policymaker David Blanchflower, who said he could see some tentative signs of recovery in the UK economy. There were also some strong results released by Debenhams who reported half-year profits of £104.2million, causing a surge in retail shares. In addition, Barclays Chief Executive John Varley confirmed that the bank had made a positive start to the year, adding it would lend an extra £11 billion to British households and businesses this year. Finally, a slow in the decline of British factory orders in April from the previous month also improved investor sentiment, although they remained wary of the state of the British economy following revelations that there is a £90 billion black hole at the heart of Alistair Darling’s budget which may require £45 billion of tax hikes and spending cuts over the coming years. The City also reacted negatively to the news that a new 50% tax rate for those earning £150,000 or more is set to be introduced, prompting fears that the UK may no longer be an attractive place to do business in the future.
In America, a report by the National Association of Realtors showing a fall of 3% in the pace of existing home sales to a much lower-than-expected annual rate of 4.57 million units shook investor confidence, as did uncertainty before US regulators reveal their stress test methodology against American banks later today.
In early trading today, the pound has weakened against the dollar ahead some important data released on both sides of the Atlantic. In the UK, Year-on-Year and Quarter-on-Quarter GDP figures are released at 9.30 BST and are expected to show that UK growth has contracted by 1.5% in the first quarter. Important UK Retail Sales data is also due for release at the same time. In America, New Home Sales and Durable Goods Orders data is out 13.30 BST and 15.00 BST respectively, with both expected to affect the dollar’s performance today.
Euro strengthens against the US dollar as Wall Street posts gains
Wall Street shares rose on Thursday as surprising regional bank earnings gave investors hope the US economy was starting to improve, despite fresh evidence of a deep recession that helped drive gold over $900 an ounce. The euro strengthened more than 1 percent against the dollar yesterday to a one week high, after data showed the eurozone's services and manufacturing sectors managed their best performance in six months in April. The good readings suggested that a severe recession in the eurozone was no longer deepening. That data, coupled with a net quarterly profit at Credit Suisse also unveiled yesterday, resulted in an increase in risk appetite which weakened the dollar. Credit Suisse announced double the anticipated first quarter results.
Better than expected bank earnings helped to increase investors’ appetite for riskier currencies, despite grim data announced in the US yesterday including news that applications for jobless claims had risen and that home sales had also fallen. However, concerns over the US government's "stress tests" on 19 major US banks have resulted in increased uncertainty this morning.
In the eurozone Germany will be releasing their IFO Business Climate results this morning, whilst in the US Durable Goods Orders and New Home Sales will be announced this afternoon.
Better than expected bank earnings helped to increase investors’ appetite for riskier currencies, despite grim data announced in the US yesterday including news that applications for jobless claims had risen and that home sales had also fallen. However, concerns over the US government's "stress tests" on 19 major US banks have resulted in increased uncertainty this morning.
In the eurozone Germany will be releasing their IFO Business Climate results this morning, whilst in the US Durable Goods Orders and New Home Sales will be announced this afternoon.
New Zealand dollar remains within recent ranges
The New Zealand dollar remained within recent ranges against the aussie yesterday, but weakened against the pound. Market attention is turning to next week’s interest rate decision by the Reserve Bank of New Zealand, which is expected to result in another 50 basis point cut to 2.5 percent.
Australian dollar weakens as investors take profits on sterling's fall
The Australian dollar has weakened off against sterling as investors took profits on the pound’s tumble after the UK’s annual budget. Sterling's gains were limited as investors remained cautious about the nation’s increasingly grim public finances, as the budget revealed Britain will run a budget deficit of 12.4% of GDP. Also, news that British manufacturing orders continued to fall in April, slightly more slowly than in March but still faster than economists had expected, capped the pound’s movement. All eyes will now be on the release of UK GDP and Retail Sales data this morning.
Thursday 23 April 2009
As the Chancellor of the Exchequer, Alistair Darling, gave one of the gloomiest budgets in recent memory, the pound lost value against most major currencies, falling by nearly two cents against the euro. The Chancellor confirmed that public borrowing would total £175bn in 2009-10, or 12.4% of GDP. The budget is not expected to return to balance until 2017-18. In addition to the dire state of public finances, the Chancellor confirmed that the UK’s economy is set to contract by 3.5% this year – three times worse than what was forecast just 5 months ago – with a forecast for growth in the economy next year of 1.25%. The growth figure for 2010 seems to be bullish, especially when you consider that the International Monetary Fund is forecasting the economy to contract by 4.1% this year, and that the UK’s economy will continue to contract next year by 0.4%. It was also announced that there would be tax hikes, including a new 50% rate of earnings above £150,000, prompting fears of a brain drain out of the UK similar to what was witnessed in the 1970s. Investors reacted to the budget by selling the pound, with sterling falling a cent and a half by the time Alistair Darling had finished speaking.
In other news yesterday, it was revealed that the number of Britons claiming jobless benefits rose in March by 73,000 people, with unemployment rising to 6.7%. The Bank of England Minutes did not spring any surprises, as the votes to keep interest rates on hold at 0.5% and to continue with its quantitative easing plan were unanimous.
In early trading today the pound is bouncing off the lows set yesterday against the single currency, as the Caxton FX analysts suggest there was a slight overreaction to the budget yesterday and we may see a bounce today as investors pick up sterling at lower levels. There is little data out of the UK today, with just the Confederation of British Industry releasing their industrial trends survey. Within the eurozone, industrial new orders, and PMI services and manufacturing data will be of note for investors.
In other news yesterday, it was revealed that the number of Britons claiming jobless benefits rose in March by 73,000 people, with unemployment rising to 6.7%. The Bank of England Minutes did not spring any surprises, as the votes to keep interest rates on hold at 0.5% and to continue with its quantitative easing plan were unanimous.
In early trading today the pound is bouncing off the lows set yesterday against the single currency, as the Caxton FX analysts suggest there was a slight overreaction to the budget yesterday and we may see a bounce today as investors pick up sterling at lower levels. There is little data out of the UK today, with just the Confederation of British Industry releasing their industrial trends survey. Within the eurozone, industrial new orders, and PMI services and manufacturing data will be of note for investors.
Pound suffers sharp losses against the US dollar
The pound fell by 1.83 cents against the US dollar yesterday after concerns rose about the future health of the UK economy following Alistair Darling’s budget. With Britain entering its worst economic downturn for over 60 years, Darling predicted that the economy would shrink by 3.5% in 2009 and announced that government borrowing would reach £175 billion. With fiscal debt set to increase by 12% of GDP in the 2009/2010 year, there are worries about how well Britain will be able service its obligations in the future. Because of this, one can expect any news of a ratings agency review of Britain’s credit worthiness to be met with a significant selling of the pound. News of the new 50% tax level for those earning in excess of £150,000 also saw sterling come under pressure, as some suggested that a ‘brain drain’ was the last the thing the struggling City needed. One upside of a weak pound is that it should encourage foreign investors to buy the £220 billion of government bonds that the treasury will issue over the coming year to fund their spending plans.
It was announced in the US yesterday that house prices had increased by 0.7% in February, positive news for the American economy where the housing market is very important.
In today’s trading the pound has pared some of yesterday’s losses ahead of the announcement of CBI industrial trends data in the UK and initial jobless claims, continuing jobless claims and existing home sales figures in the US.
It was announced in the US yesterday that house prices had increased by 0.7% in February, positive news for the American economy where the housing market is very important.
In today’s trading the pound has pared some of yesterday’s losses ahead of the announcement of CBI industrial trends data in the UK and initial jobless claims, continuing jobless claims and existing home sales figures in the US.
Euro strengthens against the US dollar
The euro strengthened against the US dollar yesterday when equity market gains in Europe and the US reduced investors’ appetite for safe-haven currencies. The single currency finished up 0.45% against the greenback at $1.3003, having started the day at $1.2945. Early in the session, US stocks fell after Morgan Stanley reported a second quarterly loss and significantly reduced its dividend. However, a report by the Office of Federal Reserve Housing Enterprise Oversight showing a rise in American house prices in February triggered a rebound on Wall Street, as investor jitters over the state of the global economy eased. As a result, their appetite to buy into the perceived riskier euro increased. Demand for the single currency more generally was also driven by UK Chancellor Alistair Darling’s optimistic budget forecast that the British economy will contract by 3.5% in 2009 before resuming growth next year. His comments sparked a mass sell-off of sterling, with investors looking to the euro and US dollar in particular. The strength of eurozone equity markets was also driven by the news that Credit Suisse Group AG, Switzerland’s largest bank by market value, returned to profit in the first quarter, increasing investor sentiment that the region is well placed to come out of recession.
There are some important pieces of data released today in both the eurozone and America. At 09.00 BST, the European Monetary Union’s Current Account data is released. In the US, the National Association of Realtors releases its Existing Home Sales for March and Month-on-Month at 15.00 BST, which should provide investors with a clearer indication of the state of the US housing market.
There are some important pieces of data released today in both the eurozone and America. At 09.00 BST, the European Monetary Union’s Current Account data is released. In the US, the National Association of Realtors releases its Existing Home Sales for March and Month-on-Month at 15.00 BST, which should provide investors with a clearer indication of the state of the US housing market.
New Zealand dollar experiences mixed trading
The New Zealand dollar had mixed results yesterday, gaining against the ailing pound but making sharp losses against the aussie. The kiwi largely remained under pressure, with share markets slipping on poor results from Morgan Stanley. It was also weighed down by comments from New Zealand Finance Minister, Bill English, who stated that the New Zealand economy was likely in its sixth quarter of recession and the government would cut future spending in an attempt to contain widening deficits.
Australian dollar makes sharp gains against the pound
The Australian dollar made sharp gains against sterling yesterday, as the pound dived after the UK annual budget. The government forecast a massive increase in public debt and announced tax rises for high earners. The UK finance minister predicted the UK economy would contract by 3.5 percent this year while government borrowing would climb to £175 billion, or more than 12 percent of Britain’s GDP. Meanwhile, proposed tax hikes for high earners also heaped pressure on sterling, with fears this could see talent go abroad. The main worry for markets at the moment is the UK's ability to service its debt. Any hint by ratings agencies that Britain’s credit rating might be lowered will see further mass selling of sterling.
Wednesday 22 April 2009
Sterling falls to 2 and a half year low against the rand following British budget
The pound fell sharply across the board this afternoon, and dropped to a 2 and a half year low against the South African rand, as the market responded to the bleak economic outlook for the UK detailed in Chancellor Alistair Darling’s budget report. The pound fell as low as 12.9796 for first time since August 2006 as market sentiment turned against sterling.
Sterling recovers recent losses against the euro
The pound recovered the losses it suffered against the single currency on Monday in choppy trading yesterday, despite official statistics revealing that retail prices had fallen for the first time in almost half a century, and ZEW releasing a better than expected economic sentiment survey in Germany. The Retail Price Index in the UK hit -0.4% year-on-year in March, which is the first time inflation has been negative since 1960, whilst the Consumer Price Index – the government’s official measure of inflation – also fell to 2.9%, although remains above the government target range. Despite the inflation figures, a hawkish member of the Monetary Policy Committee, Andrew Sentance, said that he could see glimmers of recovery in the economy.
Markets are bracing themselves for today’s budget, where Alistair Darling will have to admit the economy is set to contract 3-3.5% this year – a staggering three times worse than what he forecast just five months ago. Investors will also listen carefully to how the chancellor is planning to tackle the mounting debt problem the UK is facing up to.
There are no major economic announcements due in the eurozone today, whilst there is a plethora of data being released in the UK alongside the budget. The Bank of England minutes will be of particular interest, whilst unemployment figures, money supply, and public borrowing figures are also released.
Markets are bracing themselves for today’s budget, where Alistair Darling will have to admit the economy is set to contract 3-3.5% this year – a staggering three times worse than what he forecast just five months ago. Investors will also listen carefully to how the chancellor is planning to tackle the mounting debt problem the UK is facing up to.
There are no major economic announcements due in the eurozone today, whilst there is a plethora of data being released in the UK alongside the budget. The Bank of England minutes will be of particular interest, whilst unemployment figures, money supply, and public borrowing figures are also released.
Pound strengthens against the US dollar
The pound strengthened against the US dollar yesterday, rising by 1.36 cents from a near three week low as UK CPI inflation data suggested that the economy had not yet fallen into deflation. The Retail Price Index showed that for the first time since 1960 UK annual inflation was negative at -0.4% for March, down from zero in February, whilst the Consumer Price Index fell to 2.9%, down from 3.2% over the same period.
Despite a rise from $1.4537 to $1.4673 over the day, sterling’s gains over the US dollar were hampered by continued investor wariness ahead of Chancellor Alistair Darling’s budget announced later today. Speculation he may have to raise taxes in order to plug a multi-billion pound borrowing black hole have raised concerns, and he is expected to revise his growth forecast to -3.0% to -3.5% for the year. New Bank of England Monetary Policy Committee member Paul Fisher’s evidence to Parliament also affected investor confidence, as he warned that further weakness in global economic demand could hamper the UK’s growth prospects going forward. He also said that an extension of the Bank’s quantitative easing program and a foreign exchange intervention could not be ruled out but were highly unlikely. His downbeat predictions, together with the other data released during the day, meant the FTSE finished slightly down at -3.4 points, but losses were limited by some good news. Tesco, Europe’s second-biggest retailer, announced an underlying annual pre-tax profit of £3.13bn, a 10% improvement on the previous year, whilst Burberry, the UK’s largest publicly traded luxury-goods company, reported better-than-expected revenue figures. In America, lacklustre results announced by the Bank of New York Mellon Corp weighed on equity markets initially, as investors speculated that the worst is not yet behind the US economy, although the Dow Jones finished the day up 127.83 at 7969.56.
There is some very important data being released today on both sides of the Atlantic. The Bank of England’s Minutes from last month’s MPC interest rate meeting are released at 09.30 BST, as is the ILO Unemployment Rate, whilst from 12.30 BST the UK’s budget for the 2009/10 fiscal year will be announced by Chancellor Alistair Darling. In America, the Mortgage Bankers Association’s Mortgage Application data is announced at 12.00 BST, and at 15.00 BST the Month-on-Month Housing Price Index figures for February are released.
Despite a rise from $1.4537 to $1.4673 over the day, sterling’s gains over the US dollar were hampered by continued investor wariness ahead of Chancellor Alistair Darling’s budget announced later today. Speculation he may have to raise taxes in order to plug a multi-billion pound borrowing black hole have raised concerns, and he is expected to revise his growth forecast to -3.0% to -3.5% for the year. New Bank of England Monetary Policy Committee member Paul Fisher’s evidence to Parliament also affected investor confidence, as he warned that further weakness in global economic demand could hamper the UK’s growth prospects going forward. He also said that an extension of the Bank’s quantitative easing program and a foreign exchange intervention could not be ruled out but were highly unlikely. His downbeat predictions, together with the other data released during the day, meant the FTSE finished slightly down at -3.4 points, but losses were limited by some good news. Tesco, Europe’s second-biggest retailer, announced an underlying annual pre-tax profit of £3.13bn, a 10% improvement on the previous year, whilst Burberry, the UK’s largest publicly traded luxury-goods company, reported better-than-expected revenue figures. In America, lacklustre results announced by the Bank of New York Mellon Corp weighed on equity markets initially, as investors speculated that the worst is not yet behind the US economy, although the Dow Jones finished the day up 127.83 at 7969.56.
There is some very important data being released today on both sides of the Atlantic. The Bank of England’s Minutes from last month’s MPC interest rate meeting are released at 09.30 BST, as is the ILO Unemployment Rate, whilst from 12.30 BST the UK’s budget for the 2009/10 fiscal year will be announced by Chancellor Alistair Darling. In America, the Mortgage Bankers Association’s Mortgage Application data is announced at 12.00 BST, and at 15.00 BST the Month-on-Month Housing Price Index figures for February are released.
Euro up marginally against the US dollar
The euro strengthened slightly against the US dollar yesterday following comments by US Treasury Secretary Timothy Geithner, who gave a positive view of the US banking sector. Geithner stated on Tuesday that US banks are well capitalized, showing an optimistic view that the banks are over the worst of the recession. He also said that the Obama administration has enough money, through the Troubled Asset Relief Program (TARP), to deal with any further problems that may arise. This resulted in investors flocking to riskier currencies as opposed to the safe haven of the dollar.
Additionally, a surprisingly strong rise in German investor confidence in April gave the euro a boost while the dollar weakened against most major currencies. Germany's ZEW economic sentiment index showed its sixth month of gains, jumping to a positive 13% from a negative 3.5%. April's reading is the first positive one since July 2007. The euro was up at $1.2944 in late US trading from $1.2924 on Monday.
There are no significant announcements taking place in the US or eurozone today, but traders will be watching the release of the budget report in the UK closely as this is likely to have an effect on currencies across the board.
Additionally, a surprisingly strong rise in German investor confidence in April gave the euro a boost while the dollar weakened against most major currencies. Germany's ZEW economic sentiment index showed its sixth month of gains, jumping to a positive 13% from a negative 3.5%. April's reading is the first positive one since July 2007. The euro was up at $1.2944 in late US trading from $1.2924 on Monday.
There are no significant announcements taking place in the US or eurozone today, but traders will be watching the release of the budget report in the UK closely as this is likely to have an effect on currencies across the board.
Kiwi dollar holds steady
The New Zealand dollar managed to hold steady yesterday, as initial sharp losses in equity markets, caused by concerns over the banking sector, were partially clawed back after comments by the US treasury that banks were well capitalised. This helped bank shares rally, and reinforced a recent pattern of equities seesawing as sentiment on the banking sector rises and falls. With little data due domestically the kiwi will continue to be guided by equities and risk appetite.
Australian dollar makes small gains
The Australian dollar made small gains against sterling yesterday, as a rally in stocks helped soothe investors’ nerves. The minutes from the RBA's last meeting, released yesterday, revealed that the decision to cut rates was a close one and that any further reductions are likely to be done in small increments. Meanwhile, UK inflation data gave sterling a small positive, as CPI data indicated the economy had not yet fallen into deflation. Investor focus today will be largely on a raft of UK data, including the BoE Minutes, culminating in the release of the government’s annual budget. The budget is likely to be the gloomiest in a generation, with analysts warning the government will likely forecast an economic contraction of around 3-3.5 percent for this year. The budget deficit is also likely to near 12 percent of GDP, its highest level since WW2. Investors will remain reluctant to take on large positions ahead of this news, with other key data, such as retail sales, released in the coming days. A series of poor results may put even more pressure on the pound.
Tuesday 21 April 2009
Pound comes under selling pressure against the euro
The pound came under selling pressure yesterday as equity markets tumbled and investors began to brace themselves for the budget due in the UK on Wednesday. Despite the employers’ group, the CBI, coming out and forecasting that there will be economic growth in spring next year, markets were concerned about what may prove to be one of the grimmest budgets in decades. Sterling’s problems were also compounded by the announcement from Bank of America that it had seen a large increase in troubled loans, with the bank setting aside more funds for potential credit losses. Such news is negative for sterling due to the UK’s heavy dependence on the banking sector to drive the economy.
The Consumer and Retail Price indices are released in the UK this morning, giving an indication of inflation at present. Inflation has been cooling of late as commodity prices have fallen in the past year and the economy has been slowing. ZEW also release their economic sentiment survey within Germany this morning. Overnight we have seen Asian equities come under more selling pressure in a possible sign of things to come in Europe and North American trading. A slight boost to the FTSE today may come from Tesco, as they have reported pre-tax profits of £3.13bn, ahead of expectations, and an improvement of 10% on last year.
The Consumer and Retail Price indices are released in the UK this morning, giving an indication of inflation at present. Inflation has been cooling of late as commodity prices have fallen in the past year and the economy has been slowing. ZEW also release their economic sentiment survey within Germany this morning. Overnight we have seen Asian equities come under more selling pressure in a possible sign of things to come in Europe and North American trading. A slight boost to the FTSE today may come from Tesco, as they have reported pre-tax profits of £3.13bn, ahead of expectations, and an improvement of 10% on last year.
Pound weakens against the US dollar ahead of budget
The pound fell 2.45 cents against the US dollar in Monday’s trading to close at the 1.4537 level as investors remained cautious ahead of the UK’s budget tomorrow. Alistair Darling is expected to announce one of the poorest economic outlooks for decades when he outlines his budget for 2009-2010, and he is also expected to try and explain why the UK will need to increase borrowing to unprecedented levels. The Treasury looks set to reveal that it anticipates a 3.0-3.5% slowdown in the UK economy, a stark increase from November’s prediction of 0.75-1.25%, and that borrowing will hit around £180 billion, up from a projected £118 billion in November. The Confederation of British Industry (CBI) announced yesterday that it believes that the recession will ease off in the second quarter of this year and Rightmove reported that the rate at which UK house prices are falling had eased off. However, these announcements did little to pare sterling’s losses against a broadly stronger dollar.
In today’s trading the pound has managed to hold its ground somewhat against the US dollar, having come off an earlier low of 1.4471. Today sees the announcement of Consumer Price Index and Retail Price Index data in the UK and the ABC/Washington Post Consumer Confidence survey in the US.
In today’s trading the pound has managed to hold its ground somewhat against the US dollar, having come off an earlier low of 1.4471. Today sees the announcement of Consumer Price Index and Retail Price Index data in the UK and the ABC/Washington Post Consumer Confidence survey in the US.
Euro pressured by concerns about the banking sector
The euro rose by 0.1 percent overnight to $1.2932, a slight recovery after hitting a one-month low yesterday. Yesterday’s weakness came on the back of investors’ concerns over the global recession and renewed fears about the banking sector. Investors are also awaiting the ECB’s interest rate decision, where the central bank is expected to cut interest rates by 25 basis points and possibly announce non-conventional measures such as quantitative easing to tackle the recession, which other countries such as the UK and US have already undertaken. ECB President Jean-Claude Trichet indicated on Sunday during a trip to Tokyo that the bank's next move could likely be an interest rate cut of 25 basis points at its next meeting on May 7, but he failed to refer to any non-conventional measures, which resulted in increased investor concern about the euro.
US equities fell yesterday after Bank of America reported a jump in non-performing assets, underscoring the banking sector's troubles. The bank reported an increase in profit, but the fact that it reported a large increase in bad loans resulted in further concerns about the sector as a whole and prospects for an economic recovery. US data was also grim, with the Conference Board announcing that the recession is likely to continue throughout the summer.
In the UK, Alistair Darling will be announcing his budget report on Wednesday. This is likely to have an effect on most major currencies, because if the news is seen as bearish investors are likely to abandon riskier currencies and flock to the safe haven of the dollar, weakening the euro against the dollar.
In Germany, the ZEW Economic Sentiment Survey will be released at 10.00 BST this morning, whilst the ABC/Washington Post Consumer Confidence survey will be announced in the US at 22.00 BST.
US equities fell yesterday after Bank of America reported a jump in non-performing assets, underscoring the banking sector's troubles. The bank reported an increase in profit, but the fact that it reported a large increase in bad loans resulted in further concerns about the sector as a whole and prospects for an economic recovery. US data was also grim, with the Conference Board announcing that the recession is likely to continue throughout the summer.
In the UK, Alistair Darling will be announcing his budget report on Wednesday. This is likely to have an effect on most major currencies, because if the news is seen as bearish investors are likely to abandon riskier currencies and flock to the safe haven of the dollar, weakening the euro against the dollar.
In Germany, the ZEW Economic Sentiment Survey will be released at 10.00 BST this morning, whilst the ABC/Washington Post Consumer Confidence survey will be announced in the US at 22.00 BST.
New Zealand dollar hit by risk aversion
The New Zealand dollar was buffeted yesterday by falls in equity markets and decreased demand for riskier assets and high yielding currencies. Domestic data over the last week still paints a gloomy picture for the local economy, and investors are still pricing in a 50 basis point rate cut when the Reserve Bank of New Zealand meets next week. Local data remains sparse this week, so the kiwi will continue to be largely guided by broader market movements.
Australian dollar undermined by falling equities
The Australian dollar retraced recent gains against the pound yesterday, after falls in global equities dented investor risk appetite and demand for high yielding currencies. The share market falls were largely driven by the banking sector, with fears the situation may get worse before it gets better. This has effectively doused growing optimism that the global economy was bottoming out of its steep decline. Investors will focus on a raft of UK data in the next few days, starting with inflation figures today. But the central focus this week will be the UK government’s annual budget tomorrow. The government is already running a massive deficit so any plans to further loosen fiscal policy may be poorly received by markets.
Monday 20 April 2009
Quiet day for sterling/euro despite rally on equity markets
It proved to be a quiet day of trading for GBP/EUR on Friday, despite equity markets in Europe enjoying a rally after Citigroup and General Electric both reported smaller losses than expected in the first quarter. Investors were averse to taking on too much risk ahead of the weekend, in addition to the fact that the pound had enjoyed a significant rally in a truncated week. Sterling gained over a cent against the euro in the week, driven by improved risk appetite in markets on the back of major US banks releasing first quarterly results ahead of forecast. The single currency was also put under selling pressure during the week as comments first by Axel Weber and then by Jean-Claude Trichet suggested that interest rates are set to fall in the eurozone next month with the potential for quantitative easing as well.
There are no major economic releases due in the eurozone or the UK today, so expect GBP/EUR to continue taking its direction from equity markets.
There are no major economic releases due in the eurozone or the UK today, so expect GBP/EUR to continue taking its direction from equity markets.
Pound weakens against the US dollar despite stronger equities
The pound lost ground to the US dollar on Friday despite stronger equity markets, falling from a 3-month high against the greenback after UK Trade and Investment Minister Mervyn Davies said he was not worried about a further slide in the pound, and suggested a weak currency could help the British economy pull out of recession. The dollar was also helped by a weaker euro on Friday.
The pound has continued to lose ground to the dollar this morning, falling to a 1-week low as market players await the British budget due on Wednesday. The budget may be bad news for sterling, as it is expected to include borrowing projections of £170bn, while Chancellor Alistair Darling is expected to reveal that the economy will contract by as much as 3.5 % this year compared with his prediction of a 0.75 to 1.25% contraction in the pre-budget report last November.
There are no economic releases due from Britain today, while the only release from the States will be US Leading Indicators figures at 15.00 BST.
The pound has continued to lose ground to the dollar this morning, falling to a 1-week low as market players await the British budget due on Wednesday. The budget may be bad news for sterling, as it is expected to include borrowing projections of £170bn, while Chancellor Alistair Darling is expected to reveal that the economy will contract by as much as 3.5 % this year compared with his prediction of a 0.75 to 1.25% contraction in the pre-budget report last November.
There are no economic releases due from Britain today, while the only release from the States will be US Leading Indicators figures at 15.00 BST.
Euro falls to 5-week low against the US dollar
The euro fell against the US dollar on Friday, and has continued falling this morning to reach its lowest point since mid-March, in anticipation of another interest rate cut from the European Central Bank on May 7. The ECB is expected to cut interest rates by a quarter point as well as possibly announcing quantitative easing measures in order to combat the recession.
Comments from ECB President Jean-Claude Trichet reported in the Japanese media over the weekend helped push the euro below $1.3000 for the first time in five weeks. There was a lack of clarity regarding Trichet’s comments during a speech in Tokyo, with concerns about the central bank’s future policies weighing on the euro. Trichet indicated that there will be a 25 basis point cut announced at the next meeting but failed to clarify if and what unconventional measures may be used. He also stated that a zero interest rate would not be suitable for the eurozone.
There are no significant announcements taking place in the US or the eurozone today, to the euro/dollar pairing will be directed by broader market movements.
Comments from ECB President Jean-Claude Trichet reported in the Japanese media over the weekend helped push the euro below $1.3000 for the first time in five weeks. There was a lack of clarity regarding Trichet’s comments during a speech in Tokyo, with concerns about the central bank’s future policies weighing on the euro. Trichet indicated that there will be a 25 basis point cut announced at the next meeting but failed to clarify if and what unconventional measures may be used. He also stated that a zero interest rate would not be suitable for the eurozone.
There are no significant announcements taking place in the US or the eurozone today, to the euro/dollar pairing will be directed by broader market movements.
New Zealand dollar makes gains against the pound
The New Zealand dollar gained against sterling over the weekend after risk appetite returned to the market. Optimism in local and regional stocks extended from last week’s rally, bolstering investors’ appetite for higher yielding assets. With little domestic data due this week, the kiwi is likely to take its direction from equity markets as further corporate earnings are released.
Australian dollar strengthens over the weekend
The Australian dollar strengthened against sterling during the weekend session after global equity markets improved. Market participants will await the UK budget due this Wednesday, where it is widely expected to downgrade its economic outlook for the year whilst increasing government borrowing. The pound also suffered after UK Trade and Investment Minister Mervyn Davies told Reuters he was not worried about a further slide in the currency, while adding a weak currency would help the British economy out of a recession.
Friday 17 April 2009
Sterling erases some of its gains against the euro
Sterling erased some of the Wednesday’s gains yesterday following a raft of weak economic data released around the world. It was confirmed that the Chinese economy is slowing at its fastest pace on record as the world’s third largest economy is being hit hard by falling consumption, and there was a sharp fall in US housing starts. Negative news being released from such major economies weighed on the pound, despite David Miles – who is replacing David Blanchflower on the MPC in June – suggesting that the worst of the recession may be behind the UK, with there being tentative signs that the Bank of England’s quantitative easing plan may be working. The FTSE 100 also enjoyed a good day, breaking through the 4,000 barrier as it was lifted by banks, following JPMorgan’s first quarter results. Energy stocks also rose following firmer crude oil prices, with a barrel of crude oil trading at around the $53 mark this morning.
However, sterling’s losses were pared as it was confirmed that eurozone industrial output plummeted by a record 18.4% year on year in February, and inflation halved to an all time low in March, underlining the depth of the recession and putting more pressure on the European Central Bank for more monetary easing. Overnight we have also had comments in Tokyo from Jean-Claude Trichet, who stated that the European Central Bank must do everything to restore corporate confidence, with more rate cuts on the cards.
First tier economic data is light on the ground today in both the UK and the eurozone. We do not expect any large moves in GBP/EUR today as sterling’s recent rally looks to cool, with traders taking profits and wary of taking on too much risk ahead of the weekend.
However, sterling’s losses were pared as it was confirmed that eurozone industrial output plummeted by a record 18.4% year on year in February, and inflation halved to an all time low in March, underlining the depth of the recession and putting more pressure on the European Central Bank for more monetary easing. Overnight we have also had comments in Tokyo from Jean-Claude Trichet, who stated that the European Central Bank must do everything to restore corporate confidence, with more rate cuts on the cards.
First tier economic data is light on the ground today in both the UK and the eurozone. We do not expect any large moves in GBP/EUR today as sterling’s recent rally looks to cool, with traders taking profits and wary of taking on too much risk ahead of the weekend.
Sterling weakens against the US dollar
The pound weakened against the US dollar by 0.88 cents yesterday, to close at 1.4839 after largely weak economic data saw sentiment weaken as investor’s hopes of an economic recovery were dampened. News that JP Morgan had reported better than expected quarterly profits in the US saw confidence in the global banking system improve, and led to the FTSE 100 making gains of 2.13% by the close of the markets. In fact, the pound’s weakness was largely technical as its inability to post substantial gains above the 1.50 level led investors to take profits. In the US the rate at which housing starts and building permits were falling eased, which pointed to an easing of recessionary pressure on the US housing sector. It was also announced that the number of newly unemployed Americans applying for benefits fell to 610,000, although the number of continuing unemployed on benefits rose to 6.022 million.
In today’s trading the pound has continued to slide ahead of the announcement of the Reuters/Michigan Consumer Sentiment Index in the US as well as a speech from Federal Reserve Chairman Ben Bernanke. There are no major economic announcements in the UK today.
In today’s trading the pound has continued to slide ahead of the announcement of the Reuters/Michigan Consumer Sentiment Index in the US as well as a speech from Federal Reserve Chairman Ben Bernanke. There are no major economic announcements in the UK today.
Euro falls to fresh multi-week low against the US dollar
The euro fell to a new multi-week low against the US dollar this morning on speculation that the ECB will cut interest rates further at their next meeting. Speaking at a conference in Tokyo overnight, European Central Bank President Jean-Claude Trichet emphasized the need for price stability. Trichet indicated that it is likely there will be a quarter point interest rate cut, while ECB Governing Council member Axel Weber stated that interest rates should not fall under 1%, and if they do inter-bank lending will be adversely affected. Additionally, there were indications that there may be announcements of quantitative easing measures.
In the US, Federal Reserve Bank of Dallas President Richard W. Fisher spoke at Tsinghua University in Beijing, China to address the global impact of the United State's response to the financial crisis. His view was grim, stating that the "American economy (is) in stasis." Fisher also predicted that unemployment in the US will reach at least 10% by the end of 2009.
In the eurozone Trade Balance figures are due to be released this morning. In the US, the Fed’s Bernanke will be making a speech at 17.45 BST.
In the US, Federal Reserve Bank of Dallas President Richard W. Fisher spoke at Tsinghua University in Beijing, China to address the global impact of the United State's response to the financial crisis. His view was grim, stating that the "American economy (is) in stasis." Fisher also predicted that unemployment in the US will reach at least 10% by the end of 2009.
In the eurozone Trade Balance figures are due to be released this morning. In the US, the Fed’s Bernanke will be making a speech at 17.45 BST.
New Zealand dollar undermined by raft of weak data
The New Zealand dollar weakened yesterday after a raft of weak economic data dented hopes of an imminent recovery in the global economy. There had been sporadic data over the last few weeks which had investors speculating that the world economy is starting to bottom out. But last night’s data, including a poor Chinese GDP figure, suggested there is still some way to go. This caused investors to revert back to safe havens.
Australian dollar weighed down by disappointing Chinese growth
The Australian dollar remained slightly weaker against sterling yesterday, after a disappointing Chinese Growth report continued to weigh on market sentiment. Data revealed the Chinese economy grew by 6.1 percent in the fourth quarter, just under the forecast figure. However, there had been market speculation that the figure could have been as high as 8 percent, so the smaller figure disappointed markets. Australia is a large exporter of commodities and relies heavily on Chinese demand. The data also did nothing to reassure tentative investors that the global economy is starting to bottom out. The aussie as a high yielder will be one of the worst affected if risk aversion increases.
Thursday 16 April 2009
Sterling enjoys successful day against the euro
The pound enjoyed a successful day against the single currency yesterday, breaching the 1.1300 level for the first time since the beginning of March as investors’ confidence in sterling continued. Sterling was boosted early in trading as the RICS revealed that UK housing market sentiment improved last month, recovering to its strongest level in 13 months during March. The FTSE 100 continued to simmer below the psychological barrier of 4000, as stock markets were a little quiet ahead of the major announcements coming out of the US this week.
The single currency also came under selling pressure after European Central Bank Governing Council member Axel Weber said a package of non-standard measures was set to be unveiled at next month’s policy meeting that will stretch into next year. The European Central Bank is increasingly being viewed as being behind the curve in regards to its monetary policy, with interest rates set to fall further and a foray into quantitative easing on the cards.
There are no first tier economic announcements due in the UK today, with the eurozone releasing their Consumer Price Index and industrial production data this morning. Expect GBP/EUR to follow equity markets closely in the short term, with JPMorgan releasing their first quarter results in the US later today.
The single currency also came under selling pressure after European Central Bank Governing Council member Axel Weber said a package of non-standard measures was set to be unveiled at next month’s policy meeting that will stretch into next year. The European Central Bank is increasingly being viewed as being behind the curve in regards to its monetary policy, with interest rates set to fall further and a foray into quantitative easing on the cards.
There are no first tier economic announcements due in the UK today, with the eurozone releasing their Consumer Price Index and industrial production data this morning. Expect GBP/EUR to follow equity markets closely in the short term, with JPMorgan releasing their first quarter results in the US later today.
Sterling climbs to 3-month high against the US dollar
In Wednesday’s trading the pound strengthened over the US dollar by 1.06 cents to close the day at the 1.4997 level, after data from the Royal Institution of Chartered Surveyors suggested that interest from new home buyers increased in March. Improved sentiment amongst investors, especially with regard to the finance sector, also saw the pound receive a boost. The pound reached a day high of 1.5035 yesterday, which was a 3 month high and the first time it had traded above 1.50 since January 12th. In the US, it was announced that consumer prices fell 0.1% in March, down 0.4% on the year, and marks the first time that the US economy has seen deflation in over half a century. However, once volatile food and energy prices are removed, consumer prices actually stand up 1.8% on the year.
In today’s trading the pound has pared some of its gains as investors have reined in some of their risk appetite. Later today building permits, continuing jobless claims, initial jobless claims, housing starts and the Philadelphia Fed Manufacturing Survey data is released in the US. There are no major economic announcements in the UK today.
In today’s trading the pound has pared some of its gains as investors have reined in some of their risk appetite. Later today building permits, continuing jobless claims, initial jobless claims, housing starts and the Philadelphia Fed Manufacturing Survey data is released in the US. There are no major economic announcements in the UK today.
Euro trades mixed against the US dollar
The euro traded mixed against the US dollar yesterday, falling sharply in the morning as the market braced for another batch of US data following fresh signs of weakness in the world's largest economy. Market players were looking ahead to US data including consumer prices, housing figures and the Federal Reserve's Beige Book survey of economic conditions, and were hesitant about the data following the release of worse than expected Retail Sales figures on Tuesday. The euro was also undermined by comments from ECB council member Axel Weber, who said the central bank will announce a package of ‘non-standard measures’ in May.
In the afternoon the euro recovered some ground against the US dollar, after the Fed’s Beige Book showed that the US economic contraction continued through early April but the pace of decline was decelerating in 5 of the 12 Federal districts. The Dow Jones rose following this news, improving risk appetite.
The dollar was also pressured a little yesterday by rising gold prices, as strong physical demand from the world's largest bullion market, India, offset worries caused by a surprise drop in US consumer inflation, which could dent the metal's allure as an inflation hedge. Gold is often bought as an alternative investment to the US currency.
However, the euro has weakened against the dollar again this morning in the run up to the release of eurozone Consumer Price Index and Industrial Production figures at 10.00 BST. In the US Jobless Claims figures, housing data and the Philadelphia Fed survey are released this afternoon.
In the afternoon the euro recovered some ground against the US dollar, after the Fed’s Beige Book showed that the US economic contraction continued through early April but the pace of decline was decelerating in 5 of the 12 Federal districts. The Dow Jones rose following this news, improving risk appetite.
The dollar was also pressured a little yesterday by rising gold prices, as strong physical demand from the world's largest bullion market, India, offset worries caused by a surprise drop in US consumer inflation, which could dent the metal's allure as an inflation hedge. Gold is often bought as an alternative investment to the US currency.
However, the euro has weakened against the dollar again this morning in the run up to the release of eurozone Consumer Price Index and Industrial Production figures at 10.00 BST. In the US Jobless Claims figures, housing data and the Philadelphia Fed survey are released this afternoon.
New Zealand undermined by investor caution
The New Zealand dollar lost ground yesterday, as conflicting reports out of the US had investors remain cautious. While there were some positives in the financial sector, economic data has suggested that the world economy may be a long way off from fully recovering. Domestically the economy is still struggling and markets are fully pricing in a further interest rate cut when the Reserve Bank of New Zealand meets at the end of the month.
Australian dollar trades mixed against sterling
The Australian dollar lost ground briefly to sterling yesterday, before recovering after the UK economy received a boost by better UK housing data. Figures revealed that although UK house prices still contracted last month, their decline was the slowest in 12 months. Sales volumes also picked up from record low levels. The Aussie also received support later in the day as equity market gains continued to support the high yielders. Little data is due today so direction will largely come from equity markets and risk appetite.
Wednesday 15 April 2009
Pound hits 5-week high against the euro
Sterling hit a five week high against the single currency yesterday, as the pound was boosted by the optimistic mood in equity markets. Following the better than expected results released by the American banks Wells Fargo and Goldman Sachs in the past week, banking shares in particular have been boosted as investors feel that the global recession may be bottoming out. The pound has benefited from this, as the UK’s economy is heavily reliant on the banking sector, and with the increased risk appetite in markets investors have become willing to buy into the higher risk pound. However, one concern looming for sterling is that the recent rally in the currency may have been slightly overdone, especially if suspicions that the recent boost in equity markets is nothing more than a ‘dead cat bounce’ are proved correct.
It was confirmed yesterday that Fortis Bank made a loss of €20.6bn last year, mainly due to its break up into state control and toxic assets. The bank was broken up last year and put into control of the Dutch, Belgian and Luxembourg governments following a failed rescue attempt. Within the UK overnight, RICS revealed that UK housing market sentiment improved last month, recovering to its strongest level in 13 months during March. The average sales per surveyor increased for the first time since late 2007, although it should be stressed we are coming off extremely depressed levels.
Expect GBP / EUR to take direction from equity markets in the near term, as JPMorgan and Citigroup report their first quarterly results on Thursday and Friday respectively.
It was confirmed yesterday that Fortis Bank made a loss of €20.6bn last year, mainly due to its break up into state control and toxic assets. The bank was broken up last year and put into control of the Dutch, Belgian and Luxembourg governments following a failed rescue attempt. Within the UK overnight, RICS revealed that UK housing market sentiment improved last month, recovering to its strongest level in 13 months during March. The average sales per surveyor increased for the first time since late 2007, although it should be stressed we are coming off extremely depressed levels.
Expect GBP / EUR to take direction from equity markets in the near term, as JPMorgan and Citigroup report their first quarterly results on Thursday and Friday respectively.
Pound boosted by Goldman Sachs quarterly earnings
In Tuesday’s trading the pound strengthened by 0.40 cents to close at 1.4894 after rising equities gave sterling a boost. Banking shares performed well on news of Goldman Sachs’ strong first quarter earnings, which improved risk appetite and saw demand for the pound increase, especially as the health of the UK economy is heavily dependent on the banking sector. There were no major economic announcements in the UK yesterday, but in the US poor retail sales data was released showing that consumer spending had fallen 1.1% in March.
In today’s trading the pound has pared some losses having hit a low of 1.4824 and currently sits around yesterday’s close. This is ahead of the announcement of the Department of Communities and Local Government House Price Index in the UK, and the Consumer Price Index, TIC flows, capacity utilization and industrial production figures in the US. Also announced in America is the NY Empire State Manufacturing Index and the NAHB Housing Market Index, as well as the Fed’s Beige Book. With this barrage of data coming out in the US investors will also be paying close attention to the announcements of quarterly profits from American financial institutions over the coming days, with some suggesting that good figures will spell the end of the woe that has crippled the financial sector.
In today’s trading the pound has pared some losses having hit a low of 1.4824 and currently sits around yesterday’s close. This is ahead of the announcement of the Department of Communities and Local Government House Price Index in the UK, and the Consumer Price Index, TIC flows, capacity utilization and industrial production figures in the US. Also announced in America is the NY Empire State Manufacturing Index and the NAHB Housing Market Index, as well as the Fed’s Beige Book. With this barrage of data coming out in the US investors will also be paying close attention to the announcements of quarterly profits from American financial institutions over the coming days, with some suggesting that good figures will spell the end of the woe that has crippled the financial sector.
Euro loses ground to the US dollar
The euro lost ground to the US dollar yesterday, giving back some of Monday’s gains as Fortis Bank confirmed a €20.6bn loss for 2008 following write-downs on debt and the breakup of the business, while German manufacturing sales slid a record 23.3 percent in February compared to a year earlier.
Sentiment was also undermined yesterday afternoon by the release of worse-than-expected Retail Sales figures in the US, which overshadowed better-than-expected earnings reports from Johnson & Johnson and Goldman Sachs and halted the earlier rally on Wall Street.
There are several significant announcements taking place in the US today, including the Consumer Price Index, NY Empire State Manufacturing Index, Net Long Term TIC Flows, NAHB Housing Market Index and the Fed’s Beige Book. There are no announcements due from the eurozone.
Sentiment was also undermined yesterday afternoon by the release of worse-than-expected Retail Sales figures in the US, which overshadowed better-than-expected earnings reports from Johnson & Johnson and Goldman Sachs and halted the earlier rally on Wall Street.
There are several significant announcements taking place in the US today, including the Consumer Price Index, NY Empire State Manufacturing Index, Net Long Term TIC Flows, NAHB Housing Market Index and the Fed’s Beige Book. There are no announcements due from the eurozone.
New Zealand dollar loses ground
The New Zealand dollar lost some its recent gains over sterling as risk aversion resurfaced. Investor caution returned after poor US data and worries about corporate earnings became apparent. New Zealand first quarter inflation is due on Friday, with consumer prices expected to have risen on the previous quarter but with the annual rate forecast to decline.
Australian dollar consolidates on gains
The Australian dollar consolidated on its recent highs over sterling after market sentiment dampened after weaker than expected US results. Sales in the US unexpectedly fell in March after rising for two straight months, reducing the demand for commodity based currencies. Also, strong first quarter earnings from Goldman Sachs boosted global banking shares, which in return boosted sterling, which is driven by the UK’s heavy dependency on the banking sector.
Tuesday 14 April 2009
Pound loses some value before long weekend
In a quiet day of trading before the long weekend, the pound lost some value against the single currency as investors were wary of taking on too much risk. The pound was little changed after the widely anticipated decision by the Bank of England to keep interest rates on hold at 0.5%. The announcement contained no surprises and the central bank will continue with its quantitative easing programme. Early in trading, sterling was helped to a day high against the euro after it was confirmed that Barclays was selling its iShares asset management business for over £3bn, boosting their balance sheet.
In early trading today the pound is gaining value against the euro, as equity markets are continuing to be boosted by better than expected results released by the American banks Wells Fargo and Goldman Sachs. Both banks have revealed first quarter profits ahead of expectations, boosting risk appetite which in turn is benefiting the higher risk pound.
There are no major economic announcements due in the UK or the eurozone this morning, so expect GBP / EUR to take further direction from the movement in equity markets today.
In early trading today the pound is gaining value against the euro, as equity markets are continuing to be boosted by better than expected results released by the American banks Wells Fargo and Goldman Sachs. Both banks have revealed first quarter profits ahead of expectations, boosting risk appetite which in turn is benefiting the higher risk pound.
There are no major economic announcements due in the UK or the eurozone this morning, so expect GBP / EUR to take further direction from the movement in equity markets today.
Pound pares losses as equity markets rise
On Thursday the pound weakened against the US dollar by 0.37 cents to close at 1.4679, despite news that Britain’s goods trade balance improved to -£7.3 billion and the Bank of England kept interest rates at 0.5%. Comments from the Monetary Policy Committee confirmed that whilst rates would be kept on hold the BoE would continue with its quantitative easing programme. In the US, the number of newly unemployed Americans applying for benefits fell to 654,000, but the number of continuing unemployed on benefits rose to 5.84 million. It was also reported that American import prices fell by 0.5% in March and now stand 14.9% down on the year, while the US trade balance shrank to -$25.97 billion.
Over the holiday weekend the pound performed well over the US dollar, strengthening from 1.4679 on Friday to 1.4851 at Monday’s close, on improved sentiment. A five week rally on Wall Street and growing confidence that the financial sector might be passed the worst saw safe haven demand for the dollar fall and appetite for the risky pound improve. Goldman Sachs led the US banks in announcing their 1st quarter earnings, with surprisingly strong figures much to the delight of investors.
In today’s trading the pound has pared some earlier gains and the market is floating around Monday’s close. This is ahead of the announcement of US producer price index, retail sales (excluding autos) and business inventories data, as well as a speech by the Fed’s Stern and figures from the ABC/Washington Post consumer confidence survey. There are no major economic announcements in the UK today.
Over the holiday weekend the pound performed well over the US dollar, strengthening from 1.4679 on Friday to 1.4851 at Monday’s close, on improved sentiment. A five week rally on Wall Street and growing confidence that the financial sector might be passed the worst saw safe haven demand for the dollar fall and appetite for the risky pound improve. Goldman Sachs led the US banks in announcing their 1st quarter earnings, with surprisingly strong figures much to the delight of investors.
In today’s trading the pound has pared some earlier gains and the market is floating around Monday’s close. This is ahead of the announcement of US producer price index, retail sales (excluding autos) and business inventories data, as well as a speech by the Fed’s Stern and figures from the ABC/Washington Post consumer confidence survey. There are no major economic announcements in the UK today.
US dollar weakens against most currencies
The dollar weakened against most major currencies yesterday following news of the possibility of General Motors Corp being declared bankrupt. The US Treasury directed GM to lay the groundwork for a bankruptcy filing by 1 June, which will ensure that the company is able to file bankruptcy if it cannot reach an agreement with bondholders to exchange roughly $28 billion in debt into equity in GM, and get needed concessions from the United Auto Workers union. This resulted in strengthening of the euro against the dollar. Nevertheless, trading was limited due to the Easter holidays.
Profit reports from the biggest US banks - including Citigroup Inc., J.P. Morgan Chase & Co. and Morgan Stanley are due this week, and could determine whether US stocks can continue on to five weeks of gains. Goldman Sachs announced earnings late yesterday as opposed to the expected release this morning, stating it was issuing $5 billion in stock to pay back government-bailout funds. Earnings in the first quarter rose to $3.39 a share, much higher than predicted.
There are several significant announcements taking place in the US today, including Producer Price Index, Retail Sales and the ABC/Washington Post Consumer Confidence survey. The Fed’s Stern will also be making a speech at 21.45 BST. There are no significant announcements taking place in the eurozone today.
Profit reports from the biggest US banks - including Citigroup Inc., J.P. Morgan Chase & Co. and Morgan Stanley are due this week, and could determine whether US stocks can continue on to five weeks of gains. Goldman Sachs announced earnings late yesterday as opposed to the expected release this morning, stating it was issuing $5 billion in stock to pay back government-bailout funds. Earnings in the first quarter rose to $3.39 a share, much higher than predicted.
There are several significant announcements taking place in the US today, including Producer Price Index, Retail Sales and the ABC/Washington Post Consumer Confidence survey. The Fed’s Stern will also be making a speech at 21.45 BST. There are no significant announcements taking place in the eurozone today.
New Zealand dollar nears 6-month high against the pound
The New Zealand dollar had a mixed day yesterday, nearing 6 month highs against sterling but losing ground to the heavily backed aussie. The kiwi generally remained in demand as stronger equity markets aided demand for higher yielding currencies. However, despite domestic data revealing the housing market may be starting to bottom out, the existing economic situation still suggests that the Reserve Bank of New Zealand will cut rates when it next meets at the end of the month.
Australian dollar approaches 12-year highs
The Australian dollar gained sharply against sterling yesterday, nearing new 12 year highs. The BoE decision on Thursday did little to move markets, as it kept rates on hold at 0.5 percent and announced it would continue on with its planned quantitative easing. However, the aussie spring boarded in light trade on Monday, as improved equity markets in the US helped demand for riskier assets. The main positive for the aussie was proposals by China to stimulate domestic demand. Australia depends heavily on commodity based exports, so improved demand from China bodes well for commodity prices and the domestic economy.
Thursday 9 April 2009
Euro makes small gains against the pound
In another quiet day for GBP/EUR trading, the single currency made up some of the losses that it suffered earlier in the week. Sterling came under pressure as the FTSE 100 had a sluggish day, finishing 0.1% lower after it gained some support from Wall Street later in the day, as investors remain cautious about taking on too much risk ahead of the Easter Weekend. The single currency’s gains were reigned in, however, as recent economic news has been so poor from the eurozone. News out of the UK was little better, as consumer confidence slipped in March as people worried about rising unemployment during the recession.
The major economic news today will surround the Bank of England’s interest rate decision due at 12.00 BST. The Caxton FX analysts are forecasting that the central bank will keep rates on hold at the record low of 0.5%, whilst continuing the quantitative easing programme that commenced last month, as the Monetary Policy Committee looks for signs that their drastic action is taking affect.
Trade balance figures are also released within the UK this morning, alongside the Producer Price Index giving an indication of inflation at present. Germany also releases its industrial production figures, an industry that has been particularly hard hit for them in the past 12 months.
The major economic news today will surround the Bank of England’s interest rate decision due at 12.00 BST. The Caxton FX analysts are forecasting that the central bank will keep rates on hold at the record low of 0.5%, whilst continuing the quantitative easing programme that commenced last month, as the Monetary Policy Committee looks for signs that their drastic action is taking affect.
Trade balance figures are also released within the UK this morning, alongside the Producer Price Index giving an indication of inflation at present. Germany also releases its industrial production figures, an industry that has been particularly hard hit for them in the past 12 months.
Pound little changed against the US dollar
The pound enjoyed a small rally against the US dollar yesterday morning, as a brief rise in equity markets encouraged some investors to buy back into the riskier pound. However, sterling gave back its gains sharply in the afternoon when US shares pared most of their gains, following the US Treasury Department’s outline of its plans to aid insurers. But the dollar’s recovery was undermined somewhat by the minutes from the FOMC yesterday evening, which suggested an economic recovery was not expected until 2010, compared with its previous estimate of the end of this year. The pound therefore closed the day little changed against the dollar following this choppy trading.
The Bank of England concludes its two-day policy-setting meeting this afternoon, and is widely expected to leave interest rates on hold and continue its £75 billion bond buying scheme. The BoE has already cut interest rates to a record low of 0.5 percent, so it has little room to manoeuver further cuts.
Other news today includes Trade Balance figures and the Producer Price Index from the UK, while in the US Jobless Claims, the Import Price Index and Trade Balance figures are all released this afternoon.
The Bank of England concludes its two-day policy-setting meeting this afternoon, and is widely expected to leave interest rates on hold and continue its £75 billion bond buying scheme. The BoE has already cut interest rates to a record low of 0.5 percent, so it has little room to manoeuver further cuts.
Other news today includes Trade Balance figures and the Producer Price Index from the UK, while in the US Jobless Claims, the Import Price Index and Trade Balance figures are all released this afternoon.
US dollar trades mixed against the euro
The dollar strengthened against the euro yesterday before weakening off last night following the release of the Federal Open Committee’s minutes from their previous meeting in March. The minutes indicated that the members were almost unanimous in stating that economic conditions had deteriorated relative to their expectations at the time of the January meeting. The members also stated that a fall in foreign economic activity was of particular importance, as this was having an adverse effect on US exports.
Anxiety over upcoming quarterly results and company forecasts have affected the market this week, resulting in a fall in the Dow Jones industrials with a nearly 3 percent loss over the past two days. Additionally, the Commerce Department announced Wednesday that wholesale inventories fell by 1.5 percent in February, the highest on record and more than double analysts' expectations.
In the eurozone, Germany's Federal Statistical Office announced exports to countries in the 27-nation European Union fell 24.4 percent, while exports to non-EU countries dropped by 20.6 percent.
In the eurozone, Germany will be announcing their Industrial Production figures at 11.00 BST whilst in the US Jobless Claims, Import Price Index and particularly important Trade Balance data will be released at 13.30 BST. Additionally, the Bank of England’s interest rate decision is due this afternoon.
Anxiety over upcoming quarterly results and company forecasts have affected the market this week, resulting in a fall in the Dow Jones industrials with a nearly 3 percent loss over the past two days. Additionally, the Commerce Department announced Wednesday that wholesale inventories fell by 1.5 percent in February, the highest on record and more than double analysts' expectations.
In the eurozone, Germany's Federal Statistical Office announced exports to countries in the 27-nation European Union fell 24.4 percent, while exports to non-EU countries dropped by 20.6 percent.
In the eurozone, Germany will be announcing their Industrial Production figures at 11.00 BST whilst in the US Jobless Claims, Import Price Index and particularly important Trade Balance data will be released at 13.30 BST. Additionally, the Bank of England’s interest rate decision is due this afternoon.
New Zealand dollar steady despite risk aversion
The New Zealand dollar remained relatively steady yesterday, despite investors remaining reluctant to take on any further risk. Weak business confidence data released on Tuesday has lent weight to the argument for further rate cuts, with many analysts now forecasting a 50 basis point cut by the Reserve Bank of New Zealand when they next meet on April 30. The kiwi’s main direction for the shorter term will come from equity markets, particularly with the start of the US corporate earning season.
Australian dollar remains range-bound
The Australian dollar remained within recent ranges against sterling yesterday, as investors remain reluctant to take on more risk leading into the Easter break. Market focus today will be largely centred on the BoE's interest rate decision, due at 12.00 BST. Interest rates are expected to be held at 0.5 percent with a continuation of the central bank’s planned quantitative easing.
Wednesday 8 April 2009
Euro comes under broad selling pressure
The euro came under broad selling pressure yesterday as European share prices fell and there was a record contraction in the eurozone economy during the fourth quarter of last year. The eurozone economy contracted 1.5% on an annualised basis, which was revised downwards from an expected 1.3%, confirming the current economic plight that many European countries are finding themselves in. It was also confirmed that UK manufacturing output fell by a record amount year-on year in February according to the Office of National Statistics, with output falling 0.9% in the month. However, the fall was less than the 1.5% many were expecting, in a sign that the recession may be bottoming out.
In early trading today, the pound is hovering around the 1.1100 mark as the euro remains on the back foot following yesterday’s poor performance. Both the pound and the single currency will take further direction from equity markets, as well as factory orders data being released in Germany, and the British Retail Consortium releasing their shop price index.
In early trading today, the pound is hovering around the 1.1100 mark as the euro remains on the back foot following yesterday’s poor performance. Both the pound and the single currency will take further direction from equity markets, as well as factory orders data being released in Germany, and the British Retail Consortium releasing their shop price index.
Pound trades mixed against US dollar
The pound lost some ground to the dollar yesterday morning, after weak UK manufacturing data and a 1.2 percent drop in British equities signalled a fall in risk appetite, keeping sterling under pressure. However, by the end of the day the pound was little changed against the dollar, after it recovered from earlier losses on the back of a weaker euro, which was sold off yesterday amid falling European share prices and GDP data showing a record contraction in the eurozone economy in the fourth quarter.
The Bank of England are due to announce their next interest rate decision tomorrow, although the announcement is not expected to have a significant impact on the pound, since the central bank is unlikely to cut rates further. British interest rates currently stand at a record low of 0.5%.
This morning the BRC Shop Price Index is due from the UK, while Mortgage Applications, Wholesale Inventories and the minutes from the Fed’s FOMC meeting are released in the US this afternoon.
The Bank of England are due to announce their next interest rate decision tomorrow, although the announcement is not expected to have a significant impact on the pound, since the central bank is unlikely to cut rates further. British interest rates currently stand at a record low of 0.5%.
This morning the BRC Shop Price Index is due from the UK, while Mortgage Applications, Wholesale Inventories and the minutes from the Fed’s FOMC meeting are released in the US this afternoon.
Euro loses ground to US dollar
The dollar strengthened against the euro yesterday and has continued to gain ground to hit a 1-week high in early trade this morning, on the back of a fall in global equities, among those Tokyo's Nikkei which lost 2.8 percent. Many analysts are predicting that the euro/dollar pair could hit 1.30 by the end of the week if equity markets continue to fall.
The euro was also undermined by data released yesterday which showed that the eurozone economy recorded its largest ever quarterly fall in the fourth quarter of 2008. Additionally, Ireland released their budget plan yesterday which indicated the creation of a toxic assets agency. This resulted in a weakening of the euro and prompted investors to flock to the safe haven of the US dollar, despite the current grim state of the US economy.
Investors are also reluctant to buy riskier currencies at the moment due to the upcoming release of US corporate profits, which are expected to show a fall of approximately 37% in first quarter earnings for S&P 500 Companies.
This morning, Germany released their trade balance figures which were better than anticipated, however despite this the dollar has continued to rise against the euro. Germany will also be announcing Factory Orders at 11.00 BST. In the US, MBA Mortgage Applications will be announced at 12.00 BST. Also of particular interest will be the release of the FOMC Minutes in the US at 19.00 BST, which are released by the Board of Governors of the Federal Reserve and indicate future US interest rate policy.
The euro was also undermined by data released yesterday which showed that the eurozone economy recorded its largest ever quarterly fall in the fourth quarter of 2008. Additionally, Ireland released their budget plan yesterday which indicated the creation of a toxic assets agency. This resulted in a weakening of the euro and prompted investors to flock to the safe haven of the US dollar, despite the current grim state of the US economy.
Investors are also reluctant to buy riskier currencies at the moment due to the upcoming release of US corporate profits, which are expected to show a fall of approximately 37% in first quarter earnings for S&P 500 Companies.
This morning, Germany released their trade balance figures which were better than anticipated, however despite this the dollar has continued to rise against the euro. Germany will also be announcing Factory Orders at 11.00 BST. In the US, MBA Mortgage Applications will be announced at 12.00 BST. Also of particular interest will be the release of the FOMC Minutes in the US at 19.00 BST, which are released by the Board of Governors of the Federal Reserve and indicate future US interest rate policy.
Weak data undermines New Zealand dollar
The New Zealand dollar gave back some of its recent gains against sterling yesterday, as weak domestic data pointed towards a deepening recession in New Zealand. The NZIER business opinion survey revealed sentiment was at a 35 year low, with expectations that further economic weakness was to come. This has also led to speculation that the Reserve Bank of New Zealand may have to lower interest rates further. Demand for the high yielding kiwi was also dragged lower as markets again became nervous over the outlook for the banking sector.
Aussie dollar range bound despite rate cut
The Australian dollar remained within recent ranges against sterling yesterday, despite an initial strengthening after the RBA announced a 25 basis point rate cut. The effectiveness of the rate cut was muted, with many of the major banks refusing to pass on some, or all, of the rate cut to consumers. Meanwhile, the pound managed to hold its ground despite UK manufacturing output for February falling by 0.9 percent. The fall was less than forecast but did highlight the continuing weakness in the UK economy. The aussie has failed to make further inroads as global share prices continue to dip, making investors wary of taking on too much risk.
Tuesday 7 April 2009
Fading optimism strengthens US dollar
The US dollar strengthened over the pound by 0.76 cents yesterday to close the day at the 1.4768 level, as fading optimism about the recovery of the global economy saw stocks fall across the world. Falling equities promoted risk aversion and saw investors buy the greenback as a safe haven. The pound is particularly sensitive to equity market moves and had strengthened to 1.4958 earlier in the session.
In today’s trading the dollar has continued to strengthen over the pound, although some of its gains have been pared after reaching as low as 1.4641. Later today industrial production and manufacturing production data is released in the UK as well as Nationwide consumer confidence figures and the NIESR GBP Estimate. In the US, data from the ABC/Washington Post Consumer Confidence index is released.
In today’s trading the dollar has continued to strengthen over the pound, although some of its gains have been pared after reaching as low as 1.4641. Later today industrial production and manufacturing production data is released in the UK as well as Nationwide consumer confidence figures and the NIESR GBP Estimate. In the US, data from the ABC/Washington Post Consumer Confidence index is released.
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