The euro has fallen across the board again this morning, dropping to an 11-week low against the dollar hitting $1.2972 and enabling the pound to climb up to €1.1956.
The single currency has fallen by over 1% to sit just below the $1.30 level. A lack of confidence in the Irish bailout and growing concerns over the Iberian peninsula have caused the premium investors demand to hold Spanish bonds to soar to a lifetime high over their German counterparts. A lack of confidence is also weighing heavily on Portuguese, Irish and Italian bond yields. The effect is even starting to spread to other financially sound economies by association as Belgium’s spread widens.
Speculation on how far the euro can actually fall ranges from parity against the greenback to $1.25. However, the last two times the EUR/USD rate fell below its “200 day moving average”, the rate sank by 18% and 16% respectively, bringing $1.10 into play.
Data from the eurozone this morning has been flat, with a better than expected result in US consumer confidence later this afternoon, we could see the 16 nation currency fall even further.
Tom Hampton
Analyst – Caxton FX
Tuesday 30 November 2010
Monday 29 November 2010
The euro in free fall
The euro has fallen to two month lows against the US dollar and sterling, hitting $1.3066 and €1.1891 respectively.
A confirmed bailout package of €85billion has not managed to sooth the markets fears over the state of the eurozone as a whole. The issue has escalated so far that the single currency has fallen below its 200 day moving average and the next key target is €1.30. Investors expect further losses given the uncertainty surrounding the fiscal outlook of the regions ‘peripheral’ countries. With the state of the economies of countries like Spain and Portugal, it is hard to see light at the end of the tunnel. To put things into perspective, Spain’s economy is twice the size of Portugal, Ireland and Greece combined. A bailout package for the Spaniards would make anything we have seen so far insignificant.
With very little out this week from the UK, all eyes will be on EUR/USD, with the UK currency a mere spectator. Look for any bad news results from the eurozone and Friday’s Non-Farm Employment Change figures. Having heard very little of the results of the South Korean’s and the American’s sea trials over the weekend, an escalation in problems over there will only have a negative effect on the 16 nation currency.
Tom Hampton
Analyst – Caxton FX
A confirmed bailout package of €85billion has not managed to sooth the markets fears over the state of the eurozone as a whole. The issue has escalated so far that the single currency has fallen below its 200 day moving average and the next key target is €1.30. Investors expect further losses given the uncertainty surrounding the fiscal outlook of the regions ‘peripheral’ countries. With the state of the economies of countries like Spain and Portugal, it is hard to see light at the end of the tunnel. To put things into perspective, Spain’s economy is twice the size of Portugal, Ireland and Greece combined. A bailout package for the Spaniards would make anything we have seen so far insignificant.
With very little out this week from the UK, all eyes will be on EUR/USD, with the UK currency a mere spectator. Look for any bad news results from the eurozone and Friday’s Non-Farm Employment Change figures. Having heard very little of the results of the South Korean’s and the American’s sea trials over the weekend, an escalation in problems over there will only have a negative effect on the 16 nation currency.
Tom Hampton
Analyst – Caxton FX
Friday 26 November 2010
The dollar heads yet higher
Sterling fell to its lowest level for one month against the US dollar, bottoming out at $1.5614. With very little data out today, the pound’s just a spectator to broader market flows into the US currency. Britain’s strong links with the eurozone, which is having another torrid day in the markets, aren’t helping.
The euro’s falling after a report in the FT Deutschland said the majority of eurozone nations and the ECB were urging Portugal to apply for a bailout. Borrowing costs for Europe’s most indebted nations are at a record high as concerns reach fever pitch over several EU member states. The average yield for 10 year bonds from Greece, Ireland, Portugal, Spain and Italy reached 7.56%, its highest level since the inception of the single currency.
The dominating theme in the markets at the moment is one of risk aversion. With South Korea and America flexing their muscles on North Korea’s horizon with a series of sea trials, fears of a full on war are taking their toll on the market. The greenback has soared to a seven week high against the Japanese yen and the euro, hitting Y83.95 and €1.3204 respectively. Until a calmer sentiment descends on the market, we can also expect to see higher yielding currencies taking a step back as they have today.
Have a nice weekend and come on England!
Tom Hampton
Analyst – Caxton FX
The euro’s falling after a report in the FT Deutschland said the majority of eurozone nations and the ECB were urging Portugal to apply for a bailout. Borrowing costs for Europe’s most indebted nations are at a record high as concerns reach fever pitch over several EU member states. The average yield for 10 year bonds from Greece, Ireland, Portugal, Spain and Italy reached 7.56%, its highest level since the inception of the single currency.
The dominating theme in the markets at the moment is one of risk aversion. With South Korea and America flexing their muscles on North Korea’s horizon with a series of sea trials, fears of a full on war are taking their toll on the market. The greenback has soared to a seven week high against the Japanese yen and the euro, hitting Y83.95 and €1.3204 respectively. Until a calmer sentiment descends on the market, we can also expect to see higher yielding currencies taking a step back as they have today.
Have a nice weekend and come on England!
Tom Hampton
Analyst – Caxton FX
Thursday 25 November 2010
Déjà vu
With a quiet data calendar and little fresh news out the eurozone, today’s trading pattern smells very similar to yesterday. The euro has made up some of its lost ground over lunch, following a disappointing morning.
This morning, the euro traded near a two month low against the US dollar as rising borrowing costs in Spain and Portugal fanned the flames of concern that Europe’s debt issues will worsen. If the single currency has its fourth straight drop against the greenback, it would be its longest losing streak for three months. Reports that capital is leaving the periphery nations has put the 16 nation currency under even further pressure. The recent decline in Spanish bonds has come despite reassurance from the Spanish Deputy Finance Minister that the nations funding for the rest of the year is ‘comfortable.’ The fact that it has even come into question seems to be concern enough for the market.
The euro’s bounce after lunch could well be due to very thin trading volumes today as America loosens its belt in preparation for roast turkey and pumpkin pie. Happy thanks giving!
Tom Hampton
Analyst – Caxton FX
This morning, the euro traded near a two month low against the US dollar as rising borrowing costs in Spain and Portugal fanned the flames of concern that Europe’s debt issues will worsen. If the single currency has its fourth straight drop against the greenback, it would be its longest losing streak for three months. Reports that capital is leaving the periphery nations has put the 16 nation currency under even further pressure. The recent decline in Spanish bonds has come despite reassurance from the Spanish Deputy Finance Minister that the nations funding for the rest of the year is ‘comfortable.’ The fact that it has even come into question seems to be concern enough for the market.
The euro’s bounce after lunch could well be due to very thin trading volumes today as America loosens its belt in preparation for roast turkey and pumpkin pie. Happy thanks giving!
Tom Hampton
Analyst – Caxton FX
Wednesday 24 November 2010
Euro extends its losses
Although the euro has regained some of the day’s losses, the single currency earlier fell to a two month low against the dollar, extending its losses caused by uncertainty over Ireland’s plans to tackle its debt problems as political unrest deepens. Uncertainties remain over whether the crisis in Ireland will actually be resolved as the IMF and EU try to reach an agreement with a government teetering on the brink of collapse.
Fears of the crisis spreading to other peripheral eurozone nations has reached fever pitch as concerns seem to have skipped the next logical step, Portugal and moved straight to Spain. A default from the Iberian Peninsula would dwarf anything so far as it is the continents fourth largest economy. Peripheral government bond yield spreads over Germany have widened as a result.
Another factor lifting the dollar is of course the unstable nature of relations between North and South Korea. A statement released from north of the border suggested that the two nations are approaching a state of all out war. This has only helped the so called ‘refuge’ currencies as investors look for safety until matters are resolved.
All in all, sterling is not a bad place to have your pennies in at the moment.
Tom Hampton
Analyst – Caxton FX
Fears of the crisis spreading to other peripheral eurozone nations has reached fever pitch as concerns seem to have skipped the next logical step, Portugal and moved straight to Spain. A default from the Iberian Peninsula would dwarf anything so far as it is the continents fourth largest economy. Peripheral government bond yield spreads over Germany have widened as a result.
Another factor lifting the dollar is of course the unstable nature of relations between North and South Korea. A statement released from north of the border suggested that the two nations are approaching a state of all out war. This has only helped the so called ‘refuge’ currencies as investors look for safety until matters are resolved.
All in all, sterling is not a bad place to have your pennies in at the moment.
Tom Hampton
Analyst – Caxton FX
Tuesday 23 November 2010
This ain’t no currency war!
There has been a definite shift in sentiment towards ‘risk off’ as news that North and South Korea exchanged artillery fire last night, causing the US dollar, Swiss franc, and Japanese yen to appreciate.
The dollar rose against all of its major counterparts, bar the Swissie, as North Korea fired artillery shells into South Korea near the border. As the South Koreans retaliated, demand for refuge currencies increased and higher yielding assets took a knock. The euro, which is already struggling due to the Irish debt crisis and a renewed bout of political turmoil, has fallen about a cent and a half against the greenback (currently trading at a 7-week low). With further concerns about to rear their head over the state of the Greek economy (the government is threatening to shut down in order to save money), problems in Portugal and a tough global fourth quarter in full swing, we don’t envisage a turnaround in this euro downtrend remain for some time yet.
In addition, expect to see more volatile assets such as the aussie, kiwi and rand remain on the back foot as this period of political and economical uncertainty prevail. The Thanksgiving holiday in the US is yet a further reason for investors to place it safe as they head into a long weekend.
Tom Hampton
Analyst – Caxton FX
The dollar rose against all of its major counterparts, bar the Swissie, as North Korea fired artillery shells into South Korea near the border. As the South Koreans retaliated, demand for refuge currencies increased and higher yielding assets took a knock. The euro, which is already struggling due to the Irish debt crisis and a renewed bout of political turmoil, has fallen about a cent and a half against the greenback (currently trading at a 7-week low). With further concerns about to rear their head over the state of the Greek economy (the government is threatening to shut down in order to save money), problems in Portugal and a tough global fourth quarter in full swing, we don’t envisage a turnaround in this euro downtrend remain for some time yet.
In addition, expect to see more volatile assets such as the aussie, kiwi and rand remain on the back foot as this period of political and economical uncertainty prevail. The Thanksgiving holiday in the US is yet a further reason for investors to place it safe as they head into a long weekend.
Tom Hampton
Analyst – Caxton FX
Monday 22 November 2010
Afternoon euro weakness
On a day with very little economic data, the euro has erased early gains following an initial agreement to rescue Irish banks to prevent wide spread ‘illness’ across the eurozone’s debt markets.
The single currency had reached a one week high against the greenback and ended a four week losing streak against sterling, hitting $1.3786 and £1.1606 respectively. The highs came after EU finance ministers said the deal will create a capital fund for Irish banks and is estimated to be worth about €90billion (rumours are abundant as you’d imagine).
Ireland’s request for a bailout makes it the second euro member to seek rescue from the EU and IMF. Speculation about the financial stability of other member states has led to fears that the single currency is in fact just a bankruptcy machine working its way through the region. This will of course be music to the ears of many euro skeptics (myself included) like the Swede’s whose national referendum stopped Sweden joining the common currency. How the powers that be ever thought so many individual economies could be brought together in harmony is/was ludicrous. Each economic area needs to retain certain elements of monetary policy to ensure the best possible trading conditions for their own economy. This may explain why in the early 2000’s, Germany’s economy was at its most sluggish since world war II, however, Ireland was deserving of the nick name the ‘Celtic Tiger.’ Who is roaring now?
Tom Hampton
Analyst – Caxton FX
The single currency had reached a one week high against the greenback and ended a four week losing streak against sterling, hitting $1.3786 and £1.1606 respectively. The highs came after EU finance ministers said the deal will create a capital fund for Irish banks and is estimated to be worth about €90billion (rumours are abundant as you’d imagine).
Ireland’s request for a bailout makes it the second euro member to seek rescue from the EU and IMF. Speculation about the financial stability of other member states has led to fears that the single currency is in fact just a bankruptcy machine working its way through the region. This will of course be music to the ears of many euro skeptics (myself included) like the Swede’s whose national referendum stopped Sweden joining the common currency. How the powers that be ever thought so many individual economies could be brought together in harmony is/was ludicrous. Each economic area needs to retain certain elements of monetary policy to ensure the best possible trading conditions for their own economy. This may explain why in the early 2000’s, Germany’s economy was at its most sluggish since world war II, however, Ireland was deserving of the nick name the ‘Celtic Tiger.’ Who is roaring now?
Tom Hampton
Analyst – Caxton FX
Friday 19 November 2010
The ridiculous euro
The euro is once again edging up against most of its major counterparts, recouping earlier losses on expectations that the Irish are near a deal with the IMF and ECB for a bailout package. Against the single currency the pound has fallen back below €1.17 , whilst the euro / dollar rate is holding around $1.3650.
It seems the market is unwilling to let the EU currency deteriorate despite all the problems facing it. Other than some non EU companies and countries making bad foreign investment, it is mindbogglingly frustrating. The structural problems facing the region at the moment start with astronomically high expenditure on social security. All those who go on strike because they refuse to work past the age of 45 are fanning the flames of a defunct banking system that is over-leveraged, governmental budgeting problems and national bankruptcies. Why can the market not see that the euro is a bankruptcy machine taking each nation down one by one? After Ireland comes Portugal, then Spain; bring on Italy next, and even the more securely financed structure of France could well have problems. If it was not for the frugal Germans propping up the continent, this would have happened a long time ago. The sooner these problems are factored into the market the better.
Phew! Now that is off my chest, I am wondering if the market or the euro is the more ridiculous?
Have a good weekend.
Tom Hampton
Analyst – Caxton FX
It seems the market is unwilling to let the EU currency deteriorate despite all the problems facing it. Other than some non EU companies and countries making bad foreign investment, it is mindbogglingly frustrating. The structural problems facing the region at the moment start with astronomically high expenditure on social security. All those who go on strike because they refuse to work past the age of 45 are fanning the flames of a defunct banking system that is over-leveraged, governmental budgeting problems and national bankruptcies. Why can the market not see that the euro is a bankruptcy machine taking each nation down one by one? After Ireland comes Portugal, then Spain; bring on Italy next, and even the more securely financed structure of France could well have problems. If it was not for the frugal Germans propping up the continent, this would have happened a long time ago. The sooner these problems are factored into the market the better.
Phew! Now that is off my chest, I am wondering if the market or the euro is the more ridiculous?
Have a good weekend.
Tom Hampton
Analyst – Caxton FX
Monday 15 November 2010
Sterling slips against the dollar
Sterling is down against a broadly firmer US dollar but remains at a seven week high against the struggling euro, currently trading at $1.6070 and €1.1820 respectively.
The greenback extended its gains from last week as better than expected retail sales data prompted a group of Republican economists to launch a campaign calling for the Fed to reduce its quantitative easing plan. The dollar index (a measure of the dollar’s value in comparison to a basket of currencies) hit a six-week high while the 10-year US treasury yield rose to its highest in two months and the 5 year yield rose more than 10 basis points (higher yield prices will drive up demand for US bonds).
Further concerns over the European debt crisis have sent the pound higher against the single currency today. Ireland is currently the nation under the kosh at the moment. It has been reported the Irish have rejected a bailout package from the ECB. The offer may still be taken up however, as Irish debt is currently running at over 30% of GDP, Anglo-Irish and Allied-Irish banks combined debt is roughly equal to a full years GDP. A statement from the emerald isle earlier today mentioned that they have enough liquidity to last ‘most of 2011.’ This does not sound like a long-term solution and some sort of bailout is surely necessary? (This could ironically be euro positive)
A raft of UK data out this week along with the B of E minutes from their November meeting could send the UK currency even higher as there will be very little support for further monetary easing.
Tom Hampton
Analyst – Caxton FX
The greenback extended its gains from last week as better than expected retail sales data prompted a group of Republican economists to launch a campaign calling for the Fed to reduce its quantitative easing plan. The dollar index (a measure of the dollar’s value in comparison to a basket of currencies) hit a six-week high while the 10-year US treasury yield rose to its highest in two months and the 5 year yield rose more than 10 basis points (higher yield prices will drive up demand for US bonds).
Further concerns over the European debt crisis have sent the pound higher against the single currency today. Ireland is currently the nation under the kosh at the moment. It has been reported the Irish have rejected a bailout package from the ECB. The offer may still be taken up however, as Irish debt is currently running at over 30% of GDP, Anglo-Irish and Allied-Irish banks combined debt is roughly equal to a full years GDP. A statement from the emerald isle earlier today mentioned that they have enough liquidity to last ‘most of 2011.’ This does not sound like a long-term solution and some sort of bailout is surely necessary? (This could ironically be euro positive)
A raft of UK data out this week along with the B of E minutes from their November meeting could send the UK currency even higher as there will be very little support for further monetary easing.
Tom Hampton
Analyst – Caxton FX
Friday 12 November 2010
Ireland’s potential bailout boosts the euro
Sterling fell against the euro today – ending a run of six straight sessions on the rise - following speculation that Ireland may soon have a bailout package agreed. The supposed bailout helped to dampen fears about debt problems facing the periphery eurozone nations.
Despite poor preliminary GDP figures from France, Germany, Italy and dreadful industrial production results, the euro still managed to regain some of its losses from the past few days to currently be trading around €1.1730 against the pound.
The one saving grace for the euro is whispers in the market about an €80billion bailout package for the emerald isle. However, Ireland’s finance ministry said chatter about a bailout was untrue, but traders said reassurances from the EU and G20 that bondholders would not have to take a write down on Irish debt helped the euro to recover. It was later reiterated by the European Commission that Ireland had not requested financial aid.
It is hard to believe that GBP/EUR would have such a big movement against the grain, simply because Irish bondholders will not be taking a hit due the economy’s fragility alone. This reassurance may set some minds at ease, but stagflation in Spain and less than convincing GDP figures would surely override this? Next week we could see a full bailout plan for the Irish government, conveniently to the same tune as Allied Irish and Anglo Irish Banks combined.
Next week, with another busy week of data to be published from the UK, we could see similar gains for the UK currency.
I hope we see England drive the Aussies over the try line of parity just like the greenback has done today. Come on England!
Tom Hampton
Analyst – Caxton FX
Despite poor preliminary GDP figures from France, Germany, Italy and dreadful industrial production results, the euro still managed to regain some of its losses from the past few days to currently be trading around €1.1730 against the pound.
The one saving grace for the euro is whispers in the market about an €80billion bailout package for the emerald isle. However, Ireland’s finance ministry said chatter about a bailout was untrue, but traders said reassurances from the EU and G20 that bondholders would not have to take a write down on Irish debt helped the euro to recover. It was later reiterated by the European Commission that Ireland had not requested financial aid.
It is hard to believe that GBP/EUR would have such a big movement against the grain, simply because Irish bondholders will not be taking a hit due the economy’s fragility alone. This reassurance may set some minds at ease, but stagflation in Spain and less than convincing GDP figures would surely override this? Next week we could see a full bailout plan for the Irish government, conveniently to the same tune as Allied Irish and Anglo Irish Banks combined.
Next week, with another busy week of data to be published from the UK, we could see similar gains for the UK currency.
I hope we see England drive the Aussies over the try line of parity just like the greenback has done today. Come on England!
Tom Hampton
Analyst – Caxton FX
Wednesday 10 November 2010
Sterling gets a ‘pick me up’
Sterling strengthened against all of its major counterparts, to hit a six week high against the euro and pass $1.61 against the dollar, following the Bank of England inflation report this morning.
The BoE revised up its outlook for inflation over the next two years, further reducing the chances of an increase in monetary easing. The bank adjusted its forecast, stating that inflation is likely to remain above the 2% target, possibly through until the end of 2012. With a VAT rise of 2.50% due on January 1st, a move to increase the asset purchase programme would put too much upward pressure on an already above target rate of inflation.
The report did still have the hallmark of a dovish Mervyn King, outlining the significant uncertainties that surround the UK economy and problems that it faces next year (not to mention the vicious government spending cuts). After all, a Japanese-style scenario still looms with the possibility of high inflation and low growth over the coming months/years.
In other news, the single currency is at its lowest figure against the greenback since May, proving that the new debt issues surrounding the eurozone are starting to take their toll. If the troubles continue to hit the headlines we could see investors run from the euro as we head towards Christmas.
Tom Hampton
Analyst – Caxton FX
The BoE revised up its outlook for inflation over the next two years, further reducing the chances of an increase in monetary easing. The bank adjusted its forecast, stating that inflation is likely to remain above the 2% target, possibly through until the end of 2012. With a VAT rise of 2.50% due on January 1st, a move to increase the asset purchase programme would put too much upward pressure on an already above target rate of inflation.
The report did still have the hallmark of a dovish Mervyn King, outlining the significant uncertainties that surround the UK economy and problems that it faces next year (not to mention the vicious government spending cuts). After all, a Japanese-style scenario still looms with the possibility of high inflation and low growth over the coming months/years.
In other news, the single currency is at its lowest figure against the greenback since May, proving that the new debt issues surrounding the eurozone are starting to take their toll. If the troubles continue to hit the headlines we could see investors run from the euro as we head towards Christmas.
Tom Hampton
Analyst – Caxton FX
Tuesday 9 November 2010
Sterling hits a high against the euro
Sterling rallied to its highest level in six weeks against the euro to hit €1.1641. However, further gains have been capped amid caution ahead of Wednesday’s inflation report from the Bank of England.
Early in the session, the euro’s losses deepened due to elevated concerns over a budget vote in Ireland causing 10 year bond yields to move above 8% yesterday. However, disappointing production and trade balance figures from the UK helped to stem the pounds gains.
Since the data, the pair have traded within a very tight range as investors wait for tomorrow’s report from the BoE, with the price hovering around the 1.16 level. It is highly unlikely to see a move much higher this afternoon and indeed a bout of profit taking could see the price ebb lower as we head into the later session.
Despite the UK’s consistently high inflation figures over the past few months, tomorrow’s report could have a deflationary effect on sterling as Mervyn King is notoriously dovish at these events.
In other news, anybody skiing this season will have a shock landing in Geneva airport as the Swiss franc continues to go from strength to strength. Over the past year, the swissie has seen some large gains and pull backs. The fact remains that the franc holds the most longevity as a safe haven investment going into a tricky Q4. You may want to think before you buy your sandwich at the airport, maybe wait until you reach the economic safety of the notoriously cheap French ski resorts!
Tom Hampton
Analyst – Caxton FX
Early in the session, the euro’s losses deepened due to elevated concerns over a budget vote in Ireland causing 10 year bond yields to move above 8% yesterday. However, disappointing production and trade balance figures from the UK helped to stem the pounds gains.
Since the data, the pair have traded within a very tight range as investors wait for tomorrow’s report from the BoE, with the price hovering around the 1.16 level. It is highly unlikely to see a move much higher this afternoon and indeed a bout of profit taking could see the price ebb lower as we head into the later session.
Despite the UK’s consistently high inflation figures over the past few months, tomorrow’s report could have a deflationary effect on sterling as Mervyn King is notoriously dovish at these events.
In other news, anybody skiing this season will have a shock landing in Geneva airport as the Swiss franc continues to go from strength to strength. Over the past year, the swissie has seen some large gains and pull backs. The fact remains that the franc holds the most longevity as a safe haven investment going into a tricky Q4. You may want to think before you buy your sandwich at the airport, maybe wait until you reach the economic safety of the notoriously cheap French ski resorts!
Tom Hampton
Analyst – Caxton FX
Monday 8 November 2010
The dollar continues to strengthen
Investors continue to unwind their short positions in the greenback today with the US currency up across the board following on from Fridays positive employment data.
Solid non-farm payroll data and renewed concerns over the debt crisis in the eurozone have contributed to the descent of EUR/USD which is down one cent on the day, currently trading at $1.3930.
With most, if not all questions answered about another round of monetary easing in the US, the market is now able to bring the euro’s problems back to the foreground. Data suggesting that the Spanish economy is reaching stagflation, Irish and Spanish bonds hitting record highs against their German counterparts, and a scare over liquidity issues for a major Spanish bank (see last paragraph) have all helped to suppress the single currency.
The ‘buck’ has maintained its positive run against sterling as well, however the effects are muted as the pound continues its run on the euro, currently trading around €1.1580. GBP did manage to hit a peak of $1.6288 on Thursday, however the dollar has inched its way back to $1.6145.
Apart from the BoE Inflation Report on Wednesday, this week is fairly light on market moving announcements. Expect to see more problems exposed in the EU though; it is about time the truth came out.
In other news, I reported a potential ‘run’ on a major Spanish bank that was having liquidity problems. It turns out that these reports were unsubstantiated. The truth of the situation is this; a large queue formed outside a BBVA branch in Madrid. The people in said queue were in fact waiting to be issued with their numbers for a 10k run. BBVA had sponsored the runners out of the kindness of their corporate hearts, however this was misconstrued as a potential liquidity problem and BBVA’s share price fell by 2%....... Things really are that jumpy in the PIGS at the moment!
Tom Hampton
Analyst – Caxton FX
Solid non-farm payroll data and renewed concerns over the debt crisis in the eurozone have contributed to the descent of EUR/USD which is down one cent on the day, currently trading at $1.3930.
With most, if not all questions answered about another round of monetary easing in the US, the market is now able to bring the euro’s problems back to the foreground. Data suggesting that the Spanish economy is reaching stagflation, Irish and Spanish bonds hitting record highs against their German counterparts, and a scare over liquidity issues for a major Spanish bank (see last paragraph) have all helped to suppress the single currency.
The ‘buck’ has maintained its positive run against sterling as well, however the effects are muted as the pound continues its run on the euro, currently trading around €1.1580. GBP did manage to hit a peak of $1.6288 on Thursday, however the dollar has inched its way back to $1.6145.
Apart from the BoE Inflation Report on Wednesday, this week is fairly light on market moving announcements. Expect to see more problems exposed in the EU though; it is about time the truth came out.
In other news, I reported a potential ‘run’ on a major Spanish bank that was having liquidity problems. It turns out that these reports were unsubstantiated. The truth of the situation is this; a large queue formed outside a BBVA branch in Madrid. The people in said queue were in fact waiting to be issued with their numbers for a 10k run. BBVA had sponsored the runners out of the kindness of their corporate hearts, however this was misconstrued as a potential liquidity problem and BBVA’s share price fell by 2%....... Things really are that jumpy in the PIGS at the moment!
Tom Hampton
Analyst – Caxton FX
Friday 5 November 2010
Dollar steadies
The dollar extended its advance from a nine-month low against the euro as employment data came in almost three times higher than the market has forecast.
The single currency fell early in the session as weaker than expected European retail sales figures and German factory data were published. Further news that the Spanish economy had stagnated re-positioned focus on to the troubled periphery nations and their debt problems.
Midway through the London session, data revealed that October’s US non-farm employment change was up 151,000. The number was a vast improvement on last month’s fall of 41,000 and bettered analysts’ predictions of a lowly 61,000.
Further news of a liquidity problem within a major Spanish bank (not hard to guess which one) has helped depress the euro further.
The greenback is currently trading at $1.4093 and $1.6233 against the euro and the pound respectively.
In other news, the aussie and kiwi dollar look set to notch up their best weekly gains in months and don’t look like stopping. The aussie broke through parity this week to hit a 28 year high (the highest level since the aussie was allowed to float on the open market) of $1.0181 against the US currency.
There is not as much market moving data out next week, however inflation reports from the UK and China could be very important. Especially for our brothers from the antipodes with lofty aspirations. Hopefully England can put one over on them this weekend!
Tom Hampton
Analyst – Caxton FX
The single currency fell early in the session as weaker than expected European retail sales figures and German factory data were published. Further news that the Spanish economy had stagnated re-positioned focus on to the troubled periphery nations and their debt problems.
Midway through the London session, data revealed that October’s US non-farm employment change was up 151,000. The number was a vast improvement on last month’s fall of 41,000 and bettered analysts’ predictions of a lowly 61,000.
Further news of a liquidity problem within a major Spanish bank (not hard to guess which one) has helped depress the euro further.
The greenback is currently trading at $1.4093 and $1.6233 against the euro and the pound respectively.
In other news, the aussie and kiwi dollar look set to notch up their best weekly gains in months and don’t look like stopping. The aussie broke through parity this week to hit a 28 year high (the highest level since the aussie was allowed to float on the open market) of $1.0181 against the US currency.
There is not as much market moving data out next week, however inflation reports from the UK and China could be very important. Especially for our brothers from the antipodes with lofty aspirations. Hopefully England can put one over on them this weekend!
Tom Hampton
Analyst – Caxton FX
Thursday 4 November 2010
Dollar weakness everywhere!
The US dollar has suffered across the board following last night’s announcement from the Fed that they will issue a further $600billion in a second round of quantitative easing (the figure could actually be closer to $850billion if you include the toxic debt reinvestment scheme).
In the wake of the announcement, sterling has risen to its highest level against the greenback in nine months, almost touching $1.63. The announcement of QEII in the states contrasted with the decision from the Bank of England. At midday, the BoE announced it had decided to keep interest rates and its asset buying programme steady, enabling sterling to rise over two cents on the session.
The euro rose to a session peak of $1.4281 against the US currency after a considered, but slightly optimistic speech from JC Trichet. The size of the new bailout package across the pond, combined with the ECB alluding to a slight upward pressure on the euro from inflation sent the single currency to its strongest position since mid January.
The aussie dollar finally found stability above parity with its US counterpart to a high of $1.0146, that’s right, one George Washington is now worth less than one Queen Elisabeth II (QEII spooky?). The combination of the highest interest rates in the G20, high commodity prices and insatiable demand from China has finally proven to be enough to break through the psychologically important parity level.
This spate of dollar weakness does present a fantastic buying opportunity, especially for those long of the aussie. With the US debacle sorted until next July (hopefully), expect to see a resurgence from the greenback in the future, especially when the eurozone is no longer capable of sweeping its increasing worries under the proverbial rug.
Tom Hampton
Analyst – Caxton FX
In the wake of the announcement, sterling has risen to its highest level against the greenback in nine months, almost touching $1.63. The announcement of QEII in the states contrasted with the decision from the Bank of England. At midday, the BoE announced it had decided to keep interest rates and its asset buying programme steady, enabling sterling to rise over two cents on the session.
The euro rose to a session peak of $1.4281 against the US currency after a considered, but slightly optimistic speech from JC Trichet. The size of the new bailout package across the pond, combined with the ECB alluding to a slight upward pressure on the euro from inflation sent the single currency to its strongest position since mid January.
The aussie dollar finally found stability above parity with its US counterpart to a high of $1.0146, that’s right, one George Washington is now worth less than one Queen Elisabeth II (QEII spooky?). The combination of the highest interest rates in the G20, high commodity prices and insatiable demand from China has finally proven to be enough to break through the psychologically important parity level.
This spate of dollar weakness does present a fantastic buying opportunity, especially for those long of the aussie. With the US debacle sorted until next July (hopefully), expect to see a resurgence from the greenback in the future, especially when the eurozone is no longer capable of sweeping its increasing worries under the proverbial rug.
Tom Hampton
Analyst – Caxton FX
Tuesday 2 November 2010
Sterling falls off the back of disappointing construction data
In contrast to yesterday’s manufacturing figures, today’s construction Purchasing Managers Index (PMI) came in worse than expected. Analysts were predicting a modest monthly fall in the index to 53.1, however, the figure came in at 51.6, down quite significantly from last month at 53.8.
Following the news that activity in Britain’s construction sector slowed to its weakest level for eight months, sterling has taken a dive. The survey suggests construction will not make as strong a contribution to growth in the fourth quarter as it did earlier in the year. Thin trading volumes ahead of statements from the UK, US and EU central banks tomorrow and Thursday could have exacerbated the losses.
In other news, a surprise decision by the Reserve Bank of Australia to raise interest rates to 4.75% has once again sent the aussie through parity with its US counterpart to hit $1.0022, its highest level ever recorded. With very strong fundamentals and growing exports to China, Australia stands in a very strong position. In fact very little seems able to stop the aussie at the moment. Let’s hope the autumn internationals see a different result.
Tom Hampton
Analyst – Caxton FX
Following the news that activity in Britain’s construction sector slowed to its weakest level for eight months, sterling has taken a dive. The survey suggests construction will not make as strong a contribution to growth in the fourth quarter as it did earlier in the year. Thin trading volumes ahead of statements from the UK, US and EU central banks tomorrow and Thursday could have exacerbated the losses.
In other news, a surprise decision by the Reserve Bank of Australia to raise interest rates to 4.75% has once again sent the aussie through parity with its US counterpart to hit $1.0022, its highest level ever recorded. With very strong fundamentals and growing exports to China, Australia stands in a very strong position. In fact very little seems able to stop the aussie at the moment. Let’s hope the autumn internationals see a different result.
Tom Hampton
Analyst – Caxton FX
Monday 1 November 2010
Strong data supports sterling’s recent ascent
Sterling climbed against the US dollar and the euro following an unexpected rise in UK manufacturing data , which added weight to the UK’s economic recovery and dampened expectations that the Bank of England will extend quantitative easing.
Analysts were predicting the index would fall to 53.2, however, the Purchasing Managers Index (PMI) rose to 54.9 in October from 53.4 in September. The pound jumped to a session high of $1.6089 against the greenback and €1.1545 against the single currency.
The pleasing figure followed on from positive GDP data last week which showed that the economy grew by 0.8%, double the market’s expectation in Q3. This run of encouraging data from the UK economy all but confirms that the Bank of England will hold fire on further quantitative easing when the MPC meets later in the week (Thursday).
In other news, the currency market are generally quiet today with no big moves as investors wait to see what happens in the slew of announcements due later in the week. This is definitely the calm before the storm!
Tom Hampton
Analyst – Caxton FX
Analysts were predicting the index would fall to 53.2, however, the Purchasing Managers Index (PMI) rose to 54.9 in October from 53.4 in September. The pound jumped to a session high of $1.6089 against the greenback and €1.1545 against the single currency.
The pleasing figure followed on from positive GDP data last week which showed that the economy grew by 0.8%, double the market’s expectation in Q3. This run of encouraging data from the UK economy all but confirms that the Bank of England will hold fire on further quantitative easing when the MPC meets later in the week (Thursday).
In other news, the currency market are generally quiet today with no big moves as investors wait to see what happens in the slew of announcements due later in the week. This is definitely the calm before the storm!
Tom Hampton
Analyst – Caxton FX
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