Pound close to 7 week low against the euro

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

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

Dollar suffers worst weekly loss for 24 years

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

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

Dollar recovers a little ground against the euro

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

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

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

Kiwi's strength may be short-lived

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

Aussie dollar makes small gains over the weekend

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

Pound undermined against euro on poor economic outlook

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

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

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

Dollar weakens on quantitative easing announcement

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

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

US dollar falls to two-month low against euro

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

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

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

Aussie hits six-week highs against sterling

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

Kiwi dollar report

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