The pound weakened against the euro yesterday as some investors took advantage of the UK’s Bank holiday to push sterling lower. In a light day’s trading, speculation surrounding what the Bank of England intends to do at their next policy meeting this coming Thursday weighed on investors mind, with some suggesting there may be an extension of the central bank’s quantitative easing program to boost Britain’s ailing economy. Further contributing to investor’s concerns that the UK may not be well-placed to come out of recession was a damning report released by the European Commission, which said it expected the country’s economy to contract by 3.8% this year, a figure at odds with Chancellor Alistair Darling’s forecasts announced in the budget two weeks ago. The commission also added that, as output drops, it expected the UK’s unemployment to hit 10% by late 2010, equating to roughly 3 million Britons out of work by the end of next year. These downbeat predictions, clearly at odds with the UK government’s, put selling pressure on the pound throughout the day as investors opted to buy the euro instead, however the single currency’s gains were capped ahead of the region’s own central bank policy meeting later this week. Analysts fully expect the ECB to cut the euro zone’s interest rates by a further 25 basis points to 1% this Thursday, however question marks remain over whether it will introduce a quantitative easing program similar to that introduced by the US Fed. Last week, the Fed announced their intention to continue their quantitative easing program as planned, thus suggesting it is working and therefore putting pressure on the ECB to do the same later this week to get the euro zone out of recession. Nevertheless, the euro made ground against the pound yesterday, with potential Labour party infighting in the UK also contributing to its gains, despite several high-profile party figures pledging their support for UK Prime Minister Gordon Brown and his policies. It finished the day at 1.1197.
In early trading today, the pound has recovered all of its losses against the single currency as investors look to correct yesterday’s Bank holiday gains. There are no major announcements in the eurozone or UK today, however investors will be looking closely at both central banks to see if they give anything away ahead of their respective policy meetings on Thursday.
Tuesday, 5 May 2009
Pound strengthens against the US dollar in quiet trade
In a quiet day’s trading because of the Bank holiday, the pound strengthened against the dollar yesterday, although investor wariness ahead of the Bank of England’s policy meeting on Thursday capped sterling’s gains. With London closed, some European investors took advantage of thin trading to force sterling lower initially, with low liquidity causing exaggerated movements on currency markets. Most analysts expect British interest rates to remain on hold at 0.5% when the central bank meets later this week, however the market was nervous that it may decide to extend its quantitative easing program beyond the current £75 billion. Elsewhere, scepticism by the European Commission over Alistair Darling’s budget growth figures also encouraged a flight away from the perceived high-risk pound early in the session, as the commission predicted the UK’s economy would grow by just 0.1% in 2010, instead of the 1.25% the Chancellor predicted. In addition, the commission also said that they forecast the British economy to shrink by 3.8% this year, a figure also at odds with the 3.5% contraction Mr. Darling outlined in his budget a couple of weeks ago. The commission’s predictions contributed to sterling’s falls against the dollar early yesterday, as investors became nervous that the UK still has a long way to go before its recession bottoms out, therefore buying into the perceived safe-haven of the greenback.
However, the pound strengthened against the dollar yesterday afternoon as better-than-expected manufacturing data released on Friday fanned demand for currencies perceived to be higher risk. The latest Purchasing Manager’s survey showed a slowing in the pace of contraction to 42.9 points, far ahead of the 40 points predicted and the 39.5 point reading for March. The results gave investors hope that some form of stabilisation may be returning to the battered manufacturing sector, as well as the economy as a whole. However, investor concern over what the Bank of England is to decide later this week, as well as renewed questions over Gordon Brown’s leadership capped the pound’s gains against the dollar yesterday, finishing the day at $1.5014, despite a raft of leading Labour figures publicly declaring he was the man to lead Britain out of this recession.
In early trading today, the pound has continued its rise against the dollar as investor appetite for risk continued. There are no major announcements due in the US or UK today, however all eyes will be on the Bank of England ahead of their meeting on Thursday, and also on the 19 major US banks to see if there are any further developments before the results of the US government’s stress tests are announced later this week.
However, the pound strengthened against the dollar yesterday afternoon as better-than-expected manufacturing data released on Friday fanned demand for currencies perceived to be higher risk. The latest Purchasing Manager’s survey showed a slowing in the pace of contraction to 42.9 points, far ahead of the 40 points predicted and the 39.5 point reading for March. The results gave investors hope that some form of stabilisation may be returning to the battered manufacturing sector, as well as the economy as a whole. However, investor concern over what the Bank of England is to decide later this week, as well as renewed questions over Gordon Brown’s leadership capped the pound’s gains against the dollar yesterday, finishing the day at $1.5014, despite a raft of leading Labour figures publicly declaring he was the man to lead Britain out of this recession.
In early trading today, the pound has continued its rise against the dollar as investor appetite for risk continued. There are no major announcements due in the US or UK today, however all eyes will be on the Bank of England ahead of their meeting on Thursday, and also on the 19 major US banks to see if there are any further developments before the results of the US government’s stress tests are announced later this week.
Euro strengthens against the US dollar on improved risk appetite
The euro strengthened against the US dollar on Friday and yesterday, as improved investor appetite for risk increased demand for the single currency. In an interrupted day’s trading because of public holidays, the single currency strengthened against the greenback as strong equity market performance in Europe and elsewhere buoyed investor mood for the perceived riskier currencies. However, the euro’s gains were capped against the greenback yesterday as investor wariness heightened ahead of the European Central Bank’s policy meeting on Thursday, as investors speculated about whether the central bank will introduce a quantitative easing program like the Bank of England and the US Fed. According to analysts, it appears almost inevitable that the ECB will cut interest rates by a further 25 basis points to 1%, however what other measures they intend to implement to get the eurozone economy out of recession remains to be seen. Speculation surrounding this issue was further fanned yesterday as the European Commission produced a very downbeat report for some of the EU’s main powerhouses’ prospects for getting out of recession. It predicted Germany’s economy would contract by 5.4% this year, Italy’s by 4.4% and Ireland’s by 9%. The euro’s gains were also capped yesterday as speculation surrounding the results of the US government’s “stress tests” on 19 of America’s major banks weighed on investor sentiment. It is predicted the tests will show the banks would need more capital in the event of severe and prolonged deterioration in the global economy, meaning further government bailouts cannot be ruled out. These results capped the euro’s gains against the dollar, although it still finished up on the day at 1.3405.
In early trading today, the euro has pared some of the gains it made against the dollar yesterday as investor cautiousness ahead of the ECB’s policy meeting resurfaced. There are no major announcements in the eurozone or US today, so all eyes will be on the central bank ahead of their meeting later this week. Investors will also be watching closely for any further developments on the US government’s stress tests on major American banks.
In early trading today, the euro has pared some of the gains it made against the dollar yesterday as investor cautiousness ahead of the ECB’s policy meeting resurfaced. There are no major announcements in the eurozone or US today, so all eyes will be on the central bank ahead of their meeting later this week. Investors will also be watching closely for any further developments on the US government’s stress tests on major American banks.
New Zealand dollar remains range-bound
The New Zealand dollar remained within familiar ranges yesterday, as it garnered some support from improved investor appetite and demand for higher yielding currencies over a possible better economic outlook. But further kiwi gains may be capped with the release of the RBA rate decision overnight and key local employment data released on Thursday. New Zealand's interest rate is now below Australia's and is likely to remain that way for some time following the RBA’s decision to keep rates on hold.
Aussie dollars remains range-bound after RBA keeps rates on hold
The Australian dollar remained within recent ranges against sterling yesterday, as the aussie continues to be supported by improving risk appetite and demand for higher yielding currencies. However, further gains were capped by a UK public holiday on Monday, as well as the RBA rate decision released overnight. Despite a string of relatively poor domestic economic data recently, the Reserve Bank kept rates steady at 3%.
Friday, 1 May 2009
Sterling strengthens against the euro
Sterling strengthened against the single currency yesterday as a strong performance by London’s blue chips fuelled investor appetite for the pound. Following Wednesday’s 2% gains, the FTSE 100 added another 1.3% yesterday as renewed hope the global economic recession may be easing increased. In early trading, the pound strengthened against the euro as worse-than-expected unemployment data released by the European Monetary Union revealed the rate had reached 8.9% in March, up 0.2% from the previous month. In addition, an improvement in UK consumer confidence to levels not seen since April 2008 also contributed to sterling’s gains against the single currency, as investor confidence that the country may soon come out of recession improved. The GfK/NOP survey showed a rise for the third consecutive month, up three points in April to -27. Sterling’s gains were also driven by strong performance on equity markets, with London rising strongly following steep losses earlier in the week over fears the swine flu outbreak could turn into a pandemic.
However, the pound’s gains yesterday morning were capped to some extent after data released by mortgage lender Nationwide revealed UK house prices fell 15% compared to this time last year. It showed the average house price dropped by 0.4% on the month, partly revising a surprise 0.9% increase in March. Despite this, the pound strengthened against the euro yesterday morning, aided by speculation about what the European Central Bank intends to do at their policy meeting next week to stimulate the eurozone economy. Following the US Fed’s decision to continue with their purchasing of long-term government debt as planned, citing some tentative signs of economic recovery and strong equity market performance as the basis for their decision, investors in the eurozone speculated that the ECB could well announce a similar strategy next week ,as it appears to be working in the US. Although quantitative easing – as the process is known – may well get the region out of recession in the long-term, in the short-term it would likely see appetite for the euro reduce, as a general feeling the ECB are “behind-the-curve” would surface. As a result, speculation over what policies the ECB intends to implement weighed on the euro yesterday, resulting in a weakening against the pound.
There are no announcements in the eurozone today because of Labour Day, whilst in the UK important Purchasing Manager Index Manufacturing data for April is due at 09.30 BST.
However, the pound’s gains yesterday morning were capped to some extent after data released by mortgage lender Nationwide revealed UK house prices fell 15% compared to this time last year. It showed the average house price dropped by 0.4% on the month, partly revising a surprise 0.9% increase in March. Despite this, the pound strengthened against the euro yesterday morning, aided by speculation about what the European Central Bank intends to do at their policy meeting next week to stimulate the eurozone economy. Following the US Fed’s decision to continue with their purchasing of long-term government debt as planned, citing some tentative signs of economic recovery and strong equity market performance as the basis for their decision, investors in the eurozone speculated that the ECB could well announce a similar strategy next week ,as it appears to be working in the US. Although quantitative easing – as the process is known – may well get the region out of recession in the long-term, in the short-term it would likely see appetite for the euro reduce, as a general feeling the ECB are “behind-the-curve” would surface. As a result, speculation over what policies the ECB intends to implement weighed on the euro yesterday, resulting in a weakening against the pound.
There are no announcements in the eurozone today because of Labour Day, whilst in the UK important Purchasing Manager Index Manufacturing data for April is due at 09.30 BST.
Pound strengthens against the US dollar in choppy trade
The pound strengthened against the US dollar in a choppy day’s trading yesterday, reaching a two-week high as risk appetite returned and share prices gained. Investors’ hopes that the worst of the global economic slowdown could be over helped London’s blue chips reach their highest point for nearly three months, with the FTSE 100 adding 1.3% to Wednesday’s 2% gains. In early trading, the pound strengthened against the greenback after better-than-expected consumer confidence data released by GfK/NOP showed a three point rise to -27 this month, its third consecutive monthly rise and its highest level since April 2008.
Data released by Nationwide in the UK showed house prices resumed their decline in April. The mortgage lender said prices were 15% lower than this time last year, with the average house price falling 0.4% on the month compared with a surprise rise of 0.9% in March. But despite that news the pound continued to strengthen against the dollar yesterday morning, buoyed by strong performance on equity markets and the broad return of risk appetite following the Fed’s tentatively upbeat policy statement the previous evening. It appears markets largely shrugged off Wednesday’s worse-than-expected US GDP figure, with news about swine flu also taking a backseat, as investors looked beyond the safe-haven of the dollar to invest their capital.
However, soon after lunchtime a raft of important announcements in the US effectively wiped out sterling’s earlier gains, as investor wariness over the state of the global economy returned. Worse-than-expected Personal Spending data for March and Year-on-Year and Month-on-Month Core Personal Consumption Expenditure Prices index results produced some jitters in the market, therefore increasing demand for the perceived safe-haven of the greenback away from the riskier pound. Also, the announcement late in the day that Chrysler had filed for bankruptcy protection as part of a deal with Italian firm Fiat also reduced sterling’s earlier gains. The US carmaker will enter Chapter 11 bankruptcy under the US code, which will allow it to restructure without having to enter into liquidation. As a result, it will still be able to operate as a going concern as it clears up its remaining obligations ahead of a formal merger with Fiat. Although this news did reduce investor appetite for riskier currencies like the pound as investors feared there may be more bad news around the corner, the pound still finished the day up at $1.4787 on the back of strong equity market performance and the better-than-expected consumer confidence data released earlier in the day.
In early trading today, the pound has continued its steady rise against the greenback on improved risk appetite. At 9.30 BST, UK Purchasing Manager Index Manufacturing for April is released, whilst in the US Factory Orders figures for March and ISI Manufacturing data for April are due at 15.00 BST.
Data released by Nationwide in the UK showed house prices resumed their decline in April. The mortgage lender said prices were 15% lower than this time last year, with the average house price falling 0.4% on the month compared with a surprise rise of 0.9% in March. But despite that news the pound continued to strengthen against the dollar yesterday morning, buoyed by strong performance on equity markets and the broad return of risk appetite following the Fed’s tentatively upbeat policy statement the previous evening. It appears markets largely shrugged off Wednesday’s worse-than-expected US GDP figure, with news about swine flu also taking a backseat, as investors looked beyond the safe-haven of the dollar to invest their capital.
However, soon after lunchtime a raft of important announcements in the US effectively wiped out sterling’s earlier gains, as investor wariness over the state of the global economy returned. Worse-than-expected Personal Spending data for March and Year-on-Year and Month-on-Month Core Personal Consumption Expenditure Prices index results produced some jitters in the market, therefore increasing demand for the perceived safe-haven of the greenback away from the riskier pound. Also, the announcement late in the day that Chrysler had filed for bankruptcy protection as part of a deal with Italian firm Fiat also reduced sterling’s earlier gains. The US carmaker will enter Chapter 11 bankruptcy under the US code, which will allow it to restructure without having to enter into liquidation. As a result, it will still be able to operate as a going concern as it clears up its remaining obligations ahead of a formal merger with Fiat. Although this news did reduce investor appetite for riskier currencies like the pound as investors feared there may be more bad news around the corner, the pound still finished the day up at $1.4787 on the back of strong equity market performance and the better-than-expected consumer confidence data released earlier in the day.
In early trading today, the pound has continued its steady rise against the greenback on improved risk appetite. At 9.30 BST, UK Purchasing Manager Index Manufacturing for April is released, whilst in the US Factory Orders figures for March and ISI Manufacturing data for April are due at 15.00 BST.
Euro undermined by weak economic data
The euro weakened against the US dollar yesterday when worse-than-expected data released in the eurozone and the US, in addition to the bankruptcy of US carmaker Chrysler, weakened investors’ appetite for risk. In early trading the euro strengthened slightly against the greenback, as risk appetite improved following a surprisingly positive policy outlook briefing from the Fed the night before. However, the single currency’s gains were capped by a stream of less than positive news released yesterday morning. Initially, worse-than-expected unemployment figures in the eurozone raised investor concern that a recovery in the region may not yet be underway, as did news that US carmaker Chrysler was increasingly likely to go bankrupt by the end of the day. In addition, speculation surrounding whether the European Central Bank would follow the Fed and the Bank of England’s lead by implementing a quantitative easing program also weighed on investors’ minds ahead of the policy meeting next week. As a result, although the single currency did make some gains against the greenback initially, by lunchtime it was effectively unchanged on the day.
In the afternoon a raft of worse-than-expected economic data in the US induced a flight to the perceived safe-haven of the greenback, as investors became wary over the state of the global economy. Surprisingly poor Year-on-Year and Month-on-Month Core Personal Consumption Expenditure Prices and Personal Spending data for March resulted in some worries in the market, further exacerbated by the news late in the day that Chrysler had filed for Chapter 11 bankruptcy protection under the US code. Although the ailing car giant did meet a US government deadline to reach an agreement with Italian firm Fiat, the company’s bankruptcy did little to ease investor wariness that more bad news was not round the corner. As a result, they sold the single currency in favour of the perceived safe-haven of the greenback to reduce risk. The euro finished the day at $1.3227.
In early trading today, the single currency has clawed back its losses against the dollar from yesterday, as recent strong global equity market performance fuels hopes a recovery may be underway. There are no economic announcements in the eurozone today because of Labour Day, whilst in the US Factory Orders figures for March and ISI Manufacturing data for April are due at 15.00 BST.
In the afternoon a raft of worse-than-expected economic data in the US induced a flight to the perceived safe-haven of the greenback, as investors became wary over the state of the global economy. Surprisingly poor Year-on-Year and Month-on-Month Core Personal Consumption Expenditure Prices and Personal Spending data for March resulted in some worries in the market, further exacerbated by the news late in the day that Chrysler had filed for Chapter 11 bankruptcy protection under the US code. Although the ailing car giant did meet a US government deadline to reach an agreement with Italian firm Fiat, the company’s bankruptcy did little to ease investor wariness that more bad news was not round the corner. As a result, they sold the single currency in favour of the perceived safe-haven of the greenback to reduce risk. The euro finished the day at $1.3227.
In early trading today, the single currency has clawed back its losses against the dollar from yesterday, as recent strong global equity market performance fuels hopes a recovery may be underway. There are no economic announcements in the eurozone today because of Labour Day, whilst in the US Factory Orders figures for March and ISI Manufacturing data for April are due at 15.00 BST.
New Zealand dollar holds steady
The New Zealand dollar managed to hold its ground against sterling yesterday, although it neared 8 weeks lows against the aussie. Demand for higher risk currencies has grown with increased optimism over the early signs that the global economy may be starting to turn. This has given some support to the kiwi, but it continues to struggle against the aussie after the RBNZ lowered interest rates yesterday. With the RBNZ governor signalling rates could go even lower, markets are now expecting the yield variation between the aussie and kiwi to move further in favour of the aussie.
Australian dollar hits new decade highs
The Australian dollar reached new decade highs against sterling yesterday, before falling back to recent days ranges. Recent optimism that the global economy is starting to turn has helped demand for riskier currencies such as the aussie. Markets will largely focus on UK data today, with the release of manufacturing PMI and Mortgage lending. The M4 money supply growth data could also take on extra significance as it may provide an initial indication on whether the BoE's quantitative easing programme is starting to work. However, trade is likely to be relatively thin with European markets closed today and a public holiday in the UK on Monday.
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