US Dollar:
The dollar fell against the yen this morning even after renewed comments by U.S treasury Secretary Timothy Geithner that a strong dollar is in the country’s interest. His remarks weren’t enough to convince investors to buy the dollar, and dealers expect USD to fall further on recent news that the Federal Reserve wont increase interest rates to avoid undermining the country’s fragile recovery. USD lost some ground against sterling and the Euro on the back of this news. EUR/USD pushed over 1.50 today and recent strong data from main Euro-zone countries such as Germany have increased traders appetite towards the single currency. Signs are however that its gains will be short lived as economic expectations fail to deliver in Europe so any moves over 1.50 are expected to be temporary. Sterling was still performing well against the dollar this morning after losses felt from the possible removal of our AAA status were corrected as investors realized the comments showed nothing new. Remembrance day should bring less movement on the dollar today but all eyes will be on the UK BOE Inflation Report due at 10.30am. GBP/USD remains steady at 1.6755 before this report comes to light. EUR/USD is currently 1.5032.
Pound:
Sterling is trading up this morning against the majors in comparison to 24 hours ago. The pound made the majority of it’s gains towards yesterday’s close moving up nearly a cent vs. the USD after the Fitch ratings agency (in the US) despite saying “the UK could be at risk of losing its AAA rating” then clarified later that “the outlook for the AAA rating remained stable and there were no plans to downgrade the UK”. Sterling has since recovered before the latest UK economic data is due this morning. There is some news circulating around the markets that the pound will rally in the short term as housing numbers continue to impress, creating a small bubble in the sector. The outlook medium term is for further weakness in our currency as the BoE is expected to “interfere” through monetary policy if a housing bubble emerges in order to prevent any problems further down the line. The main problem with the housing market at the moment is the lack of supply as many hold back selling their properties in hope that prices will start rising again, a move which may well be contributing to a delayed recovery until more are “forced” to accept lower prices. We have key unemployment number out this morning including the claimant count change (change in number of people claiming benefits) expected to be down on the previous month. We are also due the average earnings index and more importantly the unemployment rate, expected at 8.0%, all due at 9.30am. Then one hour later our best friend Mr King will be delivering the BoE quarterly inflation report. The market will be looking for subtle clues regarding future monetary policy through the projection provided on inflation and economic growth over the next two years. The press conference will be featured live at Bankofengland.co.uk if you have time to see the latest tone from our central bank. Expect some volatility this morning as news is delivered as the UK and pound are put under the spotlight once again.
Euro:
The single currency continues to lose upwards momentum and isn’t expected to sustain a push much further above 1.50 on the dollar . Although positive euro data have given the impetus for a recovery in the single currency, its performance has been weak as the European Central Bank met last week hinting at plans to pump emergency liquidity into money markets to ease credit conditions. Whilst this could put the ECB above other major central banks in exiting credit-crunch strategies, finance ministers at the recent G20 meeting in Scotland showed little concern for both the recent decline in the dollar, and the strong Euro. Suggestions remain that the Euro is suffering from traders speculation in the dollar, as well as expectations that any recent improvements in the euro-zone economy will be short lived. The Euro held strong over GBP this morning after the Fitch credit agency comments on the poor state of the U.K, although these gains were pegged back after investors realized no new comments were being made. Trading should be light on this Remembrance Day but a U.K BOE inflation report at 10.30am will look to sway GBP/EUR either way. GBP/EUR currently holds firm at 1.1142 while EUR/USD remains over 1.50, at least in the short term, at 1.5032.
Daily Quote
“Concentrate on finding your goal, then concentrate on reaching it.” – Col. Michael Friedsman
