With the calendar quiet on the data front, sterling has fallen by more than half a percent against the US dollar to trade just above the $1.59 level and has also lost ground to the euro, dropping below €1.14.
The pound has come off last week’s eight and a half month high against the greenback on doubts about how aggressive Federal Reserve monetary easing will be. There is also a sense now that Fed easing has been priced in leading some investors to cut their bets against that the dollar will decline.
The UK currency also remains vulnerable ahead of the publication of the latest MPC minutes and the UK government’s spending review, both on Wednesday. The review could increase speculation for more quantitative easing in the UK, and the BoE minutes could see a dovish move led by Adam Posen, putting sterling under further pressure. This all lends itself to the hypothesis that GBP will still have a little way to go towards the downside before things improve.
In other news, the outperforming aussie dollar made a move to beat parity against the US currency on Friday off the back of Bernanke’s speech where he outlined the Fed’s case for more easing, but has since dropped back to 0.99.
Tom Hampton
Analyst - Caxton FX
Monday, 18 October 2010
Thursday, 14 October 2010
Sterling breaches $1.60 as dollar slumps
In a day short in economic data or announcements, sterling reached an eight month high against the US dollar to hit briefly hit a rate of $1.6065.
The catalyst for heavy selling pressure on the greenback came from Asia overnight as the Monetary Authority of Singapore opted to tighten policy by appreciating their currency and selling the US dollar. Further speculation that the Fed will pump an extra $500billion put even more pressure on the greenback and the UK currency looks like it could hover around the $1.60 level for some time. Whilst all of this dollar selling has been going on, the pound stayed close to its weakest level in almost six months against the euro as concerns that the Bank of England could follow the Fed and increase its monetary easing policy.
In other news, the Australian dollar has powered to a new 28-year high to nearly hit parity with the greenback, its strongest level since it was allowed to freely float in 1983 hitting $0.9992 earlier today. It looks like parity is only a matter of time now. In fact, the aussie has risen 66% in 24 months. Good on ya, you flaming galah!
Tom Hampton
Analyst – Caxton FX
The catalyst for heavy selling pressure on the greenback came from Asia overnight as the Monetary Authority of Singapore opted to tighten policy by appreciating their currency and selling the US dollar. Further speculation that the Fed will pump an extra $500billion put even more pressure on the greenback and the UK currency looks like it could hover around the $1.60 level for some time. Whilst all of this dollar selling has been going on, the pound stayed close to its weakest level in almost six months against the euro as concerns that the Bank of England could follow the Fed and increase its monetary easing policy.
In other news, the Australian dollar has powered to a new 28-year high to nearly hit parity with the greenback, its strongest level since it was allowed to freely float in 1983 hitting $0.9992 earlier today. It looks like parity is only a matter of time now. In fact, the aussie has risen 66% in 24 months. Good on ya, you flaming galah!
Tom Hampton
Analyst – Caxton FX
Wednesday, 13 October 2010
Poor consumer confidence data hinders sterling
Sterling hit a five month low of €1.1315 against the euro this morning following UK data revealing a decline in consumer confidence, but gained against the dollar as the minutes from the Fed’s latest meeting all but confirmed expectations of additional stimulus measures in the near term.
Although hitting a low early on, the pound has recovered slightly in early afternoon trade whilst remaining within a comparatively tight range. Mixed labour market figures, slightly worse than expected consumer confidence postings and the news that Standard Chartered Bank will be launching a $5.3billion rights issue (forcing overseas investors to buy the UK currency) have not given much direction. Investors are waiting for larger macro policy decisions from central banks (particularly on the question of QE) before they move away from current positions.
Also of note today has been the single currency’s inability to break through the glass ceiling of $1.40 at what is now its fourth time of asking. This barrier appears to be quite a large watershed, dividing opinion on where the US dollar and the euro will go. If the resistance level persists for too much longer, we could see a resurgence in support for the greenback and the exiting of long positions in the sixteen-nation currency. However, with QE2 increasingly looking like a question of ‘when,’ not ‘if’ in the US, the more likely outcome will be a breakout to $1.43/45 for the euro when the Fed restarts its programme of “printing money.”
Tom Hampton
Analyst – Caxton FX
Although hitting a low early on, the pound has recovered slightly in early afternoon trade whilst remaining within a comparatively tight range. Mixed labour market figures, slightly worse than expected consumer confidence postings and the news that Standard Chartered Bank will be launching a $5.3billion rights issue (forcing overseas investors to buy the UK currency) have not given much direction. Investors are waiting for larger macro policy decisions from central banks (particularly on the question of QE) before they move away from current positions.
Also of note today has been the single currency’s inability to break through the glass ceiling of $1.40 at what is now its fourth time of asking. This barrier appears to be quite a large watershed, dividing opinion on where the US dollar and the euro will go. If the resistance level persists for too much longer, we could see a resurgence in support for the greenback and the exiting of long positions in the sixteen-nation currency. However, with QE2 increasingly looking like a question of ‘when,’ not ‘if’ in the US, the more likely outcome will be a breakout to $1.43/45 for the euro when the Fed restarts its programme of “printing money.”
Tom Hampton
Analyst – Caxton FX
Tuesday, 12 October 2010
From hawk to sitting on the fence
Sterling fell to a one week low against the US dollar to bottom out at $1.5797 for the day.
Downbeat comments from David Miles, an MPC member, today helped to fan more flames about monetary easing for the UK economy. In a statement this morning, Miles said that ‘quantitative easing remains a potentially powerful tool and one that we might come to use.’ These comments came after his Dublin speech in which Miles outlined the difficulty policy makers face at the moment of not doing enough to curb inflation and being sure not to tighten policy too soon, killing the fragile recovery. The change in sentiment from these two statements could mirror the increasing concern within the Bank of England about the state of the UK economy.
The key data today was UK inflation, but the figure, 3.1%, was in line with expectations had had little lasting impact on price movements. The level has now been above the Bank’s 2% target for 10 consecutive months but the BoE remain of the stance that it will fall back over the medium term.
In other news, declining global equity markets have added to risk aversion enabling the greenback to make a slight comeback along with gold hitting yet another all time high currently trading over $1350 per troy ounce.
Downbeat comments from David Miles, an MPC member, today helped to fan more flames about monetary easing for the UK economy. In a statement this morning, Miles said that ‘quantitative easing remains a potentially powerful tool and one that we might come to use.’ These comments came after his Dublin speech in which Miles outlined the difficulty policy makers face at the moment of not doing enough to curb inflation and being sure not to tighten policy too soon, killing the fragile recovery. The change in sentiment from these two statements could mirror the increasing concern within the Bank of England about the state of the UK economy.
The key data today was UK inflation, but the figure, 3.1%, was in line with expectations had had little lasting impact on price movements. The level has now been above the Bank’s 2% target for 10 consecutive months but the BoE remain of the stance that it will fall back over the medium term.
In other news, declining global equity markets have added to risk aversion enabling the greenback to make a slight comeback along with gold hitting yet another all time high currently trading over $1350 per troy ounce.
Friday, 8 October 2010
US non-farm figures turn out worse than expected
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
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
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.
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