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.
Monday 20 April 2009
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.
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