The US non-farm employment change was expected to nudge into positive territory this month, however a 95,000 drop in employment was revealed.
This surprise figure had an initial shock effect sending the dollar down to the day’s low of £0.6278 from £0.6305 against the pound and to a fresh fifteen year low against the yen below 82yen. However, since the data was published the greenback did stage a short recovery as investors sold their short dollar positions ahead of the long US weekend.
In other news, look out this weekend as the G7 and IMF meetings will no doubt be centred around the ‘currency wars’ that showing signs of breaking out between the higher yielding currencies, in particular the Brazilian real, in an attempt to keep their exports competitive on the world stage. Another hot topic will be the increasing discomfort bigger players in the currency market are feeling from the painfully slow appreciation of the Chinese yuan. You have to feel sorry for the German export market as the euro has increased in value by almost 10% in just one month making the relative price of Chinese exports that much cheaper by comparison.
Tom Hampton
Analyst - Caxton FX
Friday, 8 October 2010
Thursday, 7 October 2010
Bad morning, good afternoon
In a complete reversal of yesterday, sterling started the day on a low hitting €1.1359 against the euro, but has since rallied.
Sterling was lower against almost all of its major peers this morning as investors braced themselves for the outside possibility that the Bank of England would announce a fresh round of monetary easing. However, as was widely expected, the interest rate remained at 0.5% and no more money was “printed.” In fact, slightly better than expected UK manufacturing data has helped the pound push upwards this afternoon as it rose to a daily high of $1.6016 against the greenback and comfortably back above €1.14.
In other news, the dollar fell to a fifteen year low against the yen and the weakest in more than eight months against the euro amid growing expectations the Fed will expand credit easing to sustain the US recovery. Look out for the US non-farm payrolls tomorrow, which are likely to have a significant impact on the Fed’s next policy decision in early November.
Sterling was lower against almost all of its major peers this morning as investors braced themselves for the outside possibility that the Bank of England would announce a fresh round of monetary easing. However, as was widely expected, the interest rate remained at 0.5% and no more money was “printed.” In fact, slightly better than expected UK manufacturing data has helped the pound push upwards this afternoon as it rose to a daily high of $1.6016 against the greenback and comfortably back above €1.14.
In other news, the dollar fell to a fifteen year low against the yen and the weakest in more than eight months against the euro amid growing expectations the Fed will expand credit easing to sustain the US recovery. Look out for the US non-farm payrolls tomorrow, which are likely to have a significant impact on the Fed’s next policy decision in early November.
Wednesday, 6 October 2010
Sterling’s good morning turns into a bad afternoon
Sterling hit a two-month high against the US dollar this morning of $1.5937.
The pound was up again this morning versus a broadly weaker dollar as the greenback hit an eight and a half month low against a basket of currencies. The UK currency however soon gave up these gains remaining under pressure on concerns that further monetary easing may be required to support the UK economy. Tomorrow morning the Bank of England is expected to hold interest rates steady at 0.5%, however, it could be torn by a three way split. Adam Posen has set out his stance in calling for a fresh round of quantitative easing, whereas Andrew Sentence is likely to once again support a 0.25% rise in the interest rate. This split in opinion is indicative of the state of the UK and the global recovery.
The continued threat of QE in the UK is also leading sterling lower against the euro. Despite Moody’s downgrading Ireland’s credit rating today, the single currency is continuing to soar as investors shed dollar positions. The price is now at fresh 4 month lows, quickly heading toward €1.14.
In other news, the continual flow of capital from the ‘old world,’ where growth has stalled, to the new world has led to the South African rand hitting a two and a half year high against the US dollar. All this despite the country grinding to a halt after the world cup when strikes threatened to collapse the economy.
Tom Hampton
Analyst - Caxton FX
The pound was up again this morning versus a broadly weaker dollar as the greenback hit an eight and a half month low against a basket of currencies. The UK currency however soon gave up these gains remaining under pressure on concerns that further monetary easing may be required to support the UK economy. Tomorrow morning the Bank of England is expected to hold interest rates steady at 0.5%, however, it could be torn by a three way split. Adam Posen has set out his stance in calling for a fresh round of quantitative easing, whereas Andrew Sentence is likely to once again support a 0.25% rise in the interest rate. This split in opinion is indicative of the state of the UK and the global recovery.
The continued threat of QE in the UK is also leading sterling lower against the euro. Despite Moody’s downgrading Ireland’s credit rating today, the single currency is continuing to soar as investors shed dollar positions. The price is now at fresh 4 month lows, quickly heading toward €1.14.
In other news, the continual flow of capital from the ‘old world,’ where growth has stalled, to the new world has led to the South African rand hitting a two and a half year high against the US dollar. All this despite the country grinding to a halt after the world cup when strikes threatened to collapse the economy.
Tom Hampton
Analyst - Caxton FX
Tuesday, 5 October 2010
Sterling under more pressure against the euro
Sterling is giving up yesterday’s gains against the euro as it almost drops to an intraday low below €1.15.
Despite better than expected data from the UK services sector (August’s figure was a 16 month low), the pound is still struggling as investors look to pick up the single currency on last sessions dip. The EU currency is also being propped up by its performance against the US dollar with the market now as short on the greenback as it has been since 2008. Consequently, the pound is up for the third straight day against the greenback, hitting a high above $1.59 due to the ongoing speculation about the Fed’s next policy meeting.
In other news, over night, the Bank of Japan’s decision to lower their already nonexistent interest rate came as a shock taking the edge of the yen’s recent strength. On the same Pacific note, the Reserve Bank of Australia decided against raising interest rates to 4.75%. However, their 4.5% rate is still by far the most attractive in the G20 and the aussie’s sharp pull back today against its peers will present a good buying opportunity.
Keeping to the central bank theme, both the ECB and BoE are due to announce policy decisions on Thursday. The fear for sterling is that UK policymakers reveal a three way split, with a vote this month in favour of quantitative easing. Such an outcome is unlikely to sit well for the pound….
Tom Hampton
Analyst – Caxton FX
Despite better than expected data from the UK services sector (August’s figure was a 16 month low), the pound is still struggling as investors look to pick up the single currency on last sessions dip. The EU currency is also being propped up by its performance against the US dollar with the market now as short on the greenback as it has been since 2008. Consequently, the pound is up for the third straight day against the greenback, hitting a high above $1.59 due to the ongoing speculation about the Fed’s next policy meeting.
In other news, over night, the Bank of Japan’s decision to lower their already nonexistent interest rate came as a shock taking the edge of the yen’s recent strength. On the same Pacific note, the Reserve Bank of Australia decided against raising interest rates to 4.75%. However, their 4.5% rate is still by far the most attractive in the G20 and the aussie’s sharp pull back today against its peers will present a good buying opportunity.
Keeping to the central bank theme, both the ECB and BoE are due to announce policy decisions on Thursday. The fear for sterling is that UK policymakers reveal a three way split, with a vote this month in favour of quantitative easing. Such an outcome is unlikely to sit well for the pound….
Tom Hampton
Analyst – Caxton FX
Wednesday, 29 September 2010
The US dollar continues to flounder
The greenback has managed to claw back early losses as it sank to $1.5874 against sterling, $1.3641 against the single currency and a two year low against the Australian dollar.
The ailing dollar fell this morning as sliding US treasury yields and mounting fears of a second round of quantitative easing pushed the currency lower. With a continuous stream of weak economic data and Q4 predicted to be very slow globally, it’s beginning to look like the only thing that may shift focus away from the greenback would be a European nation defaulting on its debt (which is looking increasingly unlikely).
Sterling felt the full force of panic over potential monetary easing measures as Adam Posen, a member of the MPC, declared that the Bank of England may even need to go as far as buying up corporate debt to guard from the double dip recession.
In other news, the House of Representatives is poised to pass legislation to pressure China to let its currency appreciate more freely. A brave move by the Americans as the Chinese Central Bank holds over a trillion dollars in notes alone. A sell off of dollars from China could send the US currency into freefall (at least the US export market might help them through these dark days?).
Tom Hampton
Analyst Caxton FX
The ailing dollar fell this morning as sliding US treasury yields and mounting fears of a second round of quantitative easing pushed the currency lower. With a continuous stream of weak economic data and Q4 predicted to be very slow globally, it’s beginning to look like the only thing that may shift focus away from the greenback would be a European nation defaulting on its debt (which is looking increasingly unlikely).
Sterling felt the full force of panic over potential monetary easing measures as Adam Posen, a member of the MPC, declared that the Bank of England may even need to go as far as buying up corporate debt to guard from the double dip recession.
In other news, the House of Representatives is poised to pass legislation to pressure China to let its currency appreciate more freely. A brave move by the Americans as the Chinese Central Bank holds over a trillion dollars in notes alone. A sell off of dollars from China could send the US currency into freefall (at least the US export market might help them through these dark days?).
Tom Hampton
Analyst Caxton FX
Tuesday, 28 September 2010
Sterling’s intra-day rise and fall
Sterling had a fairly bullish morning to hit highs of €1.1809 and $1.5895, before taking a tumble against every one of its major counterparts after a member of the Monetary Policy Committee expressed his views for more quantitative easing.
The pounds rally began this morning as dollar selling continued after reported comments from a former Chinese central bank advisor said that a devaluation of the US currency was inevitable. The ascent gathered more momentum as the revised CBI (Core Business Index) figure showed consumer spending had risen sharply last month when a fall was expected. Positive results in the UK’s Current Account and last quarter’s GDP figure kept the upward trend going until................ BOOM! Adam Posen, a member of the MPC said “I think further monetary easing is needed.” He went on to outline that it should begin with additional gilt buying, before leading into full fiscal stimulus and corporate debt purchase to avoid a “Japanese style scenario.”
These bearish comments have since sent the UK currency to intraday lows of €1.1680 and $1.5722.
In other news, the euro continues its demolition of the US dollar to climb to a high of $1.3509, despite ongoing concerns over the health of the European banking industry (with Ireland the focus at present) and the eurozone’s ability to meet escalating sovereign debt.
The pounds rally began this morning as dollar selling continued after reported comments from a former Chinese central bank advisor said that a devaluation of the US currency was inevitable. The ascent gathered more momentum as the revised CBI (Core Business Index) figure showed consumer spending had risen sharply last month when a fall was expected. Positive results in the UK’s Current Account and last quarter’s GDP figure kept the upward trend going until................ BOOM! Adam Posen, a member of the MPC said “I think further monetary easing is needed.” He went on to outline that it should begin with additional gilt buying, before leading into full fiscal stimulus and corporate debt purchase to avoid a “Japanese style scenario.”
These bearish comments have since sent the UK currency to intraday lows of €1.1680 and $1.5722.
In other news, the euro continues its demolition of the US dollar to climb to a high of $1.3509, despite ongoing concerns over the health of the European banking industry (with Ireland the focus at present) and the eurozone’s ability to meet escalating sovereign debt.
Monday, 27 September 2010
A day of little movement
On a day with a near empty data calendar, sterling has managed to regain some of its losses against the euro to the more respectable level of €1.1750. Against the US dollar, the pound pushed higher still to a seven week high at $1.5850.
The biggest story of the day is the single currency hitting its highest level against the greenback since April, just touching over $1.35. Speculation that the Federal Reserve will take additional steps to ease monetary policy has helped to depress the dollar over the past fortnight. However, expect to see this price fall slightly as fresh concerns over the health of the European banking sector are beginning to emerge after the bailout of Anglo Irish Bank to the tune of a reported €34billion.
In other news, the Chinese Yuan climbed to its highest level since 1993 amid speculation that the government will allow the currency to appreciate faster than originally expected. The engine room of the world seems to not only be fuelling global economic activity, but it is now lending its hand at controlling the foreign exchange market!
The biggest story of the day is the single currency hitting its highest level against the greenback since April, just touching over $1.35. Speculation that the Federal Reserve will take additional steps to ease monetary policy has helped to depress the dollar over the past fortnight. However, expect to see this price fall slightly as fresh concerns over the health of the European banking sector are beginning to emerge after the bailout of Anglo Irish Bank to the tune of a reported €34billion.
In other news, the Chinese Yuan climbed to its highest level since 1993 amid speculation that the government will allow the currency to appreciate faster than originally expected. The engine room of the world seems to not only be fuelling global economic activity, but it is now lending its hand at controlling the foreign exchange market!
Friday, 24 September 2010
Is the euro’s ascent sustainable?
The single currency has risen from $1.1923 against the US dollar at the start of June to hit a 5 month high today at $1.3463.
The overwhelming feeling in the market is that these gains are unsustainable amid concern that nations on the region’s periphery will default on their debts despite their surprising ability to raise funds at recent bond auctions.
The euro’s recent rally over the past few days has pushed it back into overvalued territory against a backdrop of deteriorating fundamentals. With Ireland’s GDP shrinking by 1.2% in Q2 and bond rates moving towards the ever important double digit range, a default from a PIIGS nation remains a distinct possibility. Germany cannot support a whole continent forever. Europe’s only saving grace is that each country’s government has implemented austerity measures to try and rectify the situation; their only hope is that with a tough Q4 coming up globally, everybody else has a tougher time than them.
Keen readers will remember that yesterday, at an FX trends seminar the underlying trend for Q4, potentially into next year, is Swissie strength. You will see today that the Swiss franc is at a two and a half year high against the greenback having smashed through several key resistance levels to be hunting down parity. Another currency approaching a level playing field with the US dollar is the Aussie dollar. With continuing strong growth from the tiger nations and the commodity boom, the Aussie is going from strength to strength.
Have a good weekend
Tom Hampton
Analyst Caxton FX
The overwhelming feeling in the market is that these gains are unsustainable amid concern that nations on the region’s periphery will default on their debts despite their surprising ability to raise funds at recent bond auctions.
The euro’s recent rally over the past few days has pushed it back into overvalued territory against a backdrop of deteriorating fundamentals. With Ireland’s GDP shrinking by 1.2% in Q2 and bond rates moving towards the ever important double digit range, a default from a PIIGS nation remains a distinct possibility. Germany cannot support a whole continent forever. Europe’s only saving grace is that each country’s government has implemented austerity measures to try and rectify the situation; their only hope is that with a tough Q4 coming up globally, everybody else has a tougher time than them.
Keen readers will remember that yesterday, at an FX trends seminar the underlying trend for Q4, potentially into next year, is Swissie strength. You will see today that the Swiss franc is at a two and a half year high against the greenback having smashed through several key resistance levels to be hunting down parity. Another currency approaching a level playing field with the US dollar is the Aussie dollar. With continuing strong growth from the tiger nations and the commodity boom, the Aussie is going from strength to strength.
Have a good weekend
Tom Hampton
Analyst Caxton FX
Thursday, 23 September 2010
Has Sterling bottomed out?
My screen is finally awash with green today as sterling pulls back some of its losses from the past few days against all of its major counterparts except the Swiss franc.
The pound is back up near €1.1750 against the euro having sunk to a four month low of €1.1672. Further doubt over the longevity of the European economic recovery spread as poor data showed growth in the eurozone slowed in September, causing peripheral bond yield spreads to widen against German counterparts. Against the greenback, the UK currency did creep above $1.57 earlier in the day. The dollar is continuing its fall from grace with concerns over further rounds of quantitative easing and yet more poor data showing that the amount of jobless claims unexpectedly rose last week.
Be warned, Sterling’s rebound could be a momentary correction as the pound was heavily sold on Wednesday. The UK economy remains extremely vulnerable as the BoE alluded to with the possibility of a fresh monetary injection.
In further news, I spent my morning at a seminar on foreign exchange trends, which was as interesting as it sounds.... The major themes to report for the middle to long term are;
A) A double dip recession (depending on your definition) looks an almost certainty for the US, UK and Europe, while Asia looks to be the engine house for the global economy.
B) The unstoppable ascent of the Swiss franc. The lack of support for the traditional safe US dollar has led risk averse investors to the franc and the Japanese yen. However, with the BoJ’s intervention to depress their currency, the Swissie has become the hedge of choice for many. Great internal economic fundamentals and global uncertainty in Q4 look set to send the franc higher.
C) Those of you looking for a higher-yielding asset may look to the Aussie dollar. Some analysts are saying that it is near the end of its run. However, with commodity prices at an all time high, insatiable demand from China and a high interest rate that is looking likely to be moved even higher, it has every potential.
Tom Hampton
Analyst Caxton FX
The pound is back up near €1.1750 against the euro having sunk to a four month low of €1.1672. Further doubt over the longevity of the European economic recovery spread as poor data showed growth in the eurozone slowed in September, causing peripheral bond yield spreads to widen against German counterparts. Against the greenback, the UK currency did creep above $1.57 earlier in the day. The dollar is continuing its fall from grace with concerns over further rounds of quantitative easing and yet more poor data showing that the amount of jobless claims unexpectedly rose last week.
Be warned, Sterling’s rebound could be a momentary correction as the pound was heavily sold on Wednesday. The UK economy remains extremely vulnerable as the BoE alluded to with the possibility of a fresh monetary injection.
In further news, I spent my morning at a seminar on foreign exchange trends, which was as interesting as it sounds.... The major themes to report for the middle to long term are;
A) A double dip recession (depending on your definition) looks an almost certainty for the US, UK and Europe, while Asia looks to be the engine house for the global economy.
B) The unstoppable ascent of the Swiss franc. The lack of support for the traditional safe US dollar has led risk averse investors to the franc and the Japanese yen. However, with the BoJ’s intervention to depress their currency, the Swissie has become the hedge of choice for many. Great internal economic fundamentals and global uncertainty in Q4 look set to send the franc higher.
C) Those of you looking for a higher-yielding asset may look to the Aussie dollar. Some analysts are saying that it is near the end of its run. However, with commodity prices at an all time high, insatiable demand from China and a high interest rate that is looking likely to be moved even higher, it has every potential.
Tom Hampton
Analyst Caxton FX
Wednesday, 22 September 2010
Sterling goes into freefall against the euro
In a topsy-turvy session the pound is down today against all of its major counterparts except the greenback. The UK currency plunged through support levels to be down almost a percent on the day against the euro, currently trading around €1.1660. However, sterling did enjoy gains against the US dollar, hitting an intraday high of $1.5713.
Sterling’s abysmal performance this week was not helped by the dovish tone of the MPC minutes from the meeting on September 8th. The notes showed an 8-1 vote in favour of holding interest rates at a record low of 0.5% with Andrew Sentence repeating his lone call for a rate hike. Comments from members showed genuine concern about the growth outlook for the economy and the very real potential for more quantitative easing.
Duncan Higgins, Senior Analyst at Caxton FX said ‘Despite the consumer price index holding at 3.1% last month, the members see little change in the upside risk to inflation. As long as inflationary pressures are downplayed, it appears the door is likely to remain open to further quantitative easing, a prospect that will continue to weigh on sterling going forward.’
In other news, last night the Federal Reserve lowered the level at which it would intervene with what it is being called Quantitative Easing II (QE2) causing the market to choose the path of least resistance and sell the greenback.
Tom Hampton
Analyst Caxton FX
Sterling’s abysmal performance this week was not helped by the dovish tone of the MPC minutes from the meeting on September 8th. The notes showed an 8-1 vote in favour of holding interest rates at a record low of 0.5% with Andrew Sentence repeating his lone call for a rate hike. Comments from members showed genuine concern about the growth outlook for the economy and the very real potential for more quantitative easing.
Duncan Higgins, Senior Analyst at Caxton FX said ‘Despite the consumer price index holding at 3.1% last month, the members see little change in the upside risk to inflation. As long as inflationary pressures are downplayed, it appears the door is likely to remain open to further quantitative easing, a prospect that will continue to weigh on sterling going forward.’
In other news, last night the Federal Reserve lowered the level at which it would intervene with what it is being called Quantitative Easing II (QE2) causing the market to choose the path of least resistance and sell the greenback.
Tom Hampton
Analyst Caxton FX
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