Currency Market - Updated Regularly

[PhilBen]

The Pound - lost its momentum yesterday after the release of UK net borrowing figures. They showed a big increase in government debt levels. Net borrowing for February came out at 21.4bln, up from the £4.3bln seen in January. UK mortgage approvals came out worse than expected adding further pressure to sterling.

Risk aversion has set back into currency markets as investors retreat back into the safety of the Dollar. The Pound however did keep over 1.11 on the Euro as Greece still plagues the euro-zone, but we could see the sterling suffer even further as market concern over the UK ability to fund its debt widens.

Major Data out Today
DE PPI
CA CPI
CA CPI - BoC core rate
CA Retail Sales

Live IB rates at 11.06 am UK
GBP - EURO 1.115
GBP - USD 1.514
GBP- AUD 1.645
EURO - USD 1.356

[PhilBen]

The Pound - fell sharply against the dollar and the euro on Friday after a BOE policymaker said the UK could yet fall back into recession. The Bank's Monetary Policy Committee member Andrew Sentance said there was a chance of a double-dip recession. It was claimed the UK exited recession during the last three months of last year, but in real terms was not an accurate statement. The pound has been falling in the run-up to the general election and may continue while the uncertainty of a hung government looms. There are also concerns about the high level of UK public debt, although figures released on Thursday suggest borrowing this financial year will come in under the government's forecast. It could be a very volatile market over the next few weeks and any Euro or Dollar buyers should think about using Limits and Stops to protect themselves from any negative data.

The Dollar - The US House of Representatives has narrowly voted to pass a landmark healthcare reform bill at the heart of President Barack Obama's agenda. In early morning trading, the news has pushed the Dollar once again below the 1.50’s on against Sterling and low 1.35’s on the Euro.

Major Data out Today
AU New motor vehicle sales

Live IB rates at 4.44 am UK
GBP - EURO 1.106
GBP - USD 1.496
GBP- AUD 1.636
EURO - USD 1.351

[PhilBen]

The Pound - the inflation rate fell more than economists forecast in February as lower costs of items from toys to energy absorbed price pressures in the economy. Consumer prices rose 3% from a year earlier; this was after a 3.5 % increase in January. February Retail Prices stayed the same as in January at 3.7%. The FTSE 100 rose to the highest level since 2008 as legal and general made a profit and announced it was increasing its dividend by 33 %. However BOE policy maker David Blanchflower announced on Bloomberg that Britain might not face as “monumental” a situation as people assume if the nation were to lose its top AAA credit rating. I do think this is a possibility and the markets could react quite aggressively to any such news.

The Dollar - Sales of existing U.S. homes fell in February for a third month, and the number of properties on the market climbed by the most in almost two years, casting more debt to a full US recovery. Purchases dropped 0.6 % the lowest levels in eight months.

The EURO – At last Germany and France have agreed that the International Monetary Fund should be involved in any aid package for debt-burdened Greece. This could help the Euro regain the confidence of investor’s short term at least.

No important UK data out today but quite a lot from Germany and the US

Major Data out Today
EU Flash Services PMI
DE IFO Business Climate
DE IFO Current Conditions
DE IFO Expectations
US Durable goods orders
US Durables ex defence
US Durables ex transport
US New Home Sales
NZ GDP

Live IB rates at 4.10 am UK
GBP - EURO 1.113
GBP - USD 1.498
GBP- AUD 1.633
EURO - USD 1.345

[PhilBen]

The Pound – As I expected Alistair Darling’s budget had no or little effect on the markets. Also being so close to an election, all could be reviewed and changed if his party does not win. Meanwhile the pound held around the 1.11’s all day and closed at 1.1165 against the Euro. However the dollar maid significant gains against both Sterling closing on Wednesday night at 1.487 and the Euro at 1.331 as orders for durable goods in the US rose in February for a third month but new-home sales fell to the lowest on record, indicating manufacturing will stay at the forefront of the economic recovery. Anyone who would like to read about Alistair Darling’s budget or use a calculator to see if they are better off, all the information is on the BBC website.

Major Data out Today
US Initial Claims

Live IB rates at 4.10 am UK
GBP - EURO 1.118
GBP - USD 1.488
GBP- AUD 1.634
EURO - USD 1.33

[bakeja]

The currency markets are treating the pound very kindly when you consider how little is being done to address the incredibly serious fiscal deficit situation. This year the government is spending roughly 6,600£ per household more than it takes in taxes. It has explicitly said it plans to do the same next year and even when its deficit cutting plans do kick in, there is no pretence that any money will be paid back merely that they will borrow less.

Maybe the election will produce a change of course but I doubt it as the public seems to be buying Labour's "borrowing supports the economy" argument. I am sure if the Euro didn't have its own problems parity would have been reached by now.

Jeff Randall's column in the Telegraph was brilliant this week:

Budget 2010: Labour is stealing from our children's future to buy votes - Telegraph

[La Gallega]

The currency markets are treating the pound very kindly when you consider how little is being done to address the incredibly serious fiscal deficit situation. This year the government is spending roughly 6,600£ per household more than it takes in taxes. It has explicitly said it plans to do the same next year and even when its deficit cutting plans do kick in, there is no pretence that any money will be paid back merely that they will borrow less.

Maybe the election will produce a change of course but I doubt it as the public seems to be buying Labour's "borrowing supports the economy" argument. I am sure if the Euro didn't have its own problems parity would have been reached by now.

Jeff Randall's column in the Telegraph was brilliant this week:

Budget 2010: Labour is stealing from our children's future to buy votes - Telegraph

Hi Bakeja

Of course if this had been a UK crisis only, then yes - probably worse than parity actually.

As it is, I still have faith in the UK's ability to recover given the freedom of fiscal policy it has which the rest of the EU doesn't. As an economy, it is up there with the top tier of the Europeans and nothing to do with Spain's economy (size or model). Its ability to recover therefore, albeit from a larger amount is so much greater in my opinion. In fact, I would compare it favourably to looking at the billionaire list in 2007 then last year and again this year. It's amazing how quickly the top tier billionaires recovered their positions. Added to all that (I hope not too optimistic outlook) you have the very real fact that one of the UK's primary business partners (amongst other things) the USA, has yet again trashed all the theories that were flying around last year...... "end of the dollar as a reserve currency", "Euro to take over from dollar" lol etc etc.

In short, I'm very optimistic that the euro even with Germany and France has some way to go and that the UK once the debt stops growing and inflation becomes a bigger threat or a bigger reality, and interest rates therefore increase, we will once again see the pound rally. As a sufferer I'm hoping that will be some day soon but there I have to admit I am quite concerned as it could take quite some time and the individual bank balances aren't getting any bigger.

LG.x

ps On another note, I believe there's a huge amount of manipulation going on with GBP Euro at the moment. I wouldn't quite compare it to the likes of speculative/control movements with the likes of shares like Jazztel, but I would say that the peaks and troughs we see just as it hits support and resistances are more than normal trading. Someone is making a killing and/or losing fortunes.

[PhilBen]

You have also got to look at the flip side of that.We could see the Pound drop even further. We have no or very little exports, no investment in business etc and no one has really addressed the financial problems. The UK cannot hope that being a leader in the finance industry will turn things around.

[PhilBen]

The Pound - fell for a second week against the dollar at concern that the recovery has yet to take hold and as investors bet the government is not acting fast enough to cut the budget deficit. Reports this week showed inflation slowed more than forecast last month and business investment had the biggest annual drop on record in the fourth quarter. A survey conducted after Alistair Darling’s budget speech on March 24 showed the government moved ahead of the Conservatives on who the voters trust most to run the economy. Other polls showed an election will leave the government without a parliamentary majority. Sterling could come under more pressure this week as data out such as the Nationwide Building Society report could show there is a slowing down of house prices.

The Dollar - Employers in the U.S. added jobs in March for the second time in more than two years, setting the stage for a broadening of the expansion, economists said before a report this week. Payrolls probably rose by 190,000, the most in three years.

The Euro – Greece is still a headache for the Euro and could be for some time to come. The uncertainty is clearly pushing investors away from the Euro and into the safety of the Dollar. However it seems that Sterling can’t seem to take advantage of this weakness.

Major Data out Today
DE CPI (P)
DE HICP (P)
US Core PCE Price Index
US Personal income
US Personal spending

Live IB rates at 6.31 am UK
GBP - EURO 1.111
GBP - USD 1.493
GBP- AUD 1.643
EURO - USD 1.343

[PhilBen]

The Pound – Britain’s AAA credit rating has been affirmed by Standard & Poor’s, which has also kept its negative outlook on the nation’s debt on concern that the government hasn’t been specific enough about how it will cut the budget deficit. This is due to the absence of a strong fiscal consolidation plan, the U.K.’s net general government debt burden may approach a level incompatible with the AAA rating. This could be a time bomb regarding sterling and the currency market. Any UK government will struggle to convince investors that the British pound is a good bet unless a major overall of finance in the UK is sought. With GDP data out today we could see a big move in the market.

The Dollar - Stocks and commodities gained as the dollar fell against the euro as signs of economic recovery sparked demand for higher-yielding assets. Oil rose the most in more than five weeks. This is again good news for the dollar with consumer spending rising for a fifth month in a row, even though the job market is still not in a strong position.

The Euro – Greece plans to sell 5 billion Euros of seven-year bonds. This should help stabilize the Euro against the majors and give some confidence to investors.

Major Data out Today
UK GDP (F)
US Consumer confidence

Live IB rates at 6.43 am UK
GBP – EURO 1.112
GBP - USD 1.50
GBP- AUD 1.632
EURO - USD 1.349

[Gerry]

You have also got to look at the flip side of that.We could see the Pound drop even further. We have no or very little exports, no investment in business etc and no one has really addressed the financial problems. The UK cannot hope that being a leader in the finance industry will turn things around.

Much as I hate to admit it ,I think you might be spot on here