Financial market conditions continue to be strained—BoE economist
Sterling trading back down into 1.10
Sterling trades down into 1.62 against the USD
Sterling continues to trade into 1.78 against the Australian dollar
US Dollar:
The Dollar was up against Sterling and the Euro after Dubai news that Abu Dhabi would help in the debt repayments and more optimistic data gave a boost to expectations that the Fed Reserve will raise interest rates sooner than expected. We will see on Wednesday when the Fed delivers its statement whether they will respond to the recent strong data and signal and end to the current stimulative conditions. Some investors believe the Fed are unlikely to be influenced by one or even two months strong data. Nevertheless, USD surged forward over the Euro to the 1.46 level and solidified its gains over Sterling after Darling’s pessimistic pre-budget report. GBP/USD currently 1.6220, EUR/USD 1.4660.
Pound:
The pound is trading lower this morning against the USD, down from 1.6327 to 1.6232 and from 1.1132 1.1061 against the Euro. News over night for the UK housing market disappointed the market showing a sharper fall for the Rightmove house price index from last month, -2.2% against –1.6% previously. The market expects a further drop next month, meaning the final quarter of 2009 will see 3 consecutive monthly price falls as the motivation of winter sellers outweighs the growing lack of choice for potential buyers. Rightmove predicts a burst of activity and asking price gains again in early spring, continuing the heightened level of activity seen during 2009.
In addition to this economic news, the Bank of England quarterly bulletin created by Spencer Dale (chief economist) highlighted that conditions amongst financial markets continued to be strained. He did however go on to highlight that the unemployment rate was “less rapid” than feared helped by low levels of UK pay growth. Sterling generally is continuing to trade within tight ranges against the Euro and be prevented from any significant gains. Sentiment over the UK economy remains poor with investors continue to observe recovery closely before re-investing in a fragile pound. Leading up to Christmas sterling may become more sensitive as activity amongst the financial markets reduces. There is no further UK data due today.
Euro:
The Euro has lost out recently and was down this morning against Sterling and the Dollar after recent concern over the faltering global recovery and now fears of sovereign default. The prospect of losing other Euro-zone countries losing their status like Greece and Spain has weighed heavy on the single currency. However, signs are that there could be a turn around after German Chancellor Angela Merkel said other Euro-zone countries should help them if needed.
With Sterling assets hit by Darling’s pre-budget report failing to provide a layout of the U.K repayment plan, the Euro could find strength, but this will probably be based on two things; Whether bailing out Greece will be seen as the best solution (some member states may see this is a bad precedent to set); and whether risk appetite will drive the market, favouring the Dollar in riskier times and the Euro and Sterling with better economic news, or whether interest rate differentials will affect market movement. We will have a better picture this week. EUR/USD 1.4660, GBP/EUR in tight ranges at 1.1060.
Quote of the Day
“Life is like a coin. You can spend it any way you wish, but you only spend it once.” – Lillian Dickson
Interbank exchange rates
GBP/TRY 2.4407
GBP/PLN 4.5783
GBP/MAD 12.593
EUR/CAD 1.5489
GBP/MXN 21.062
USD/MXN 12.910
EUR/MXN 19.032
USD/CAD 1.0508
EUR/ZAR 11.110
GBP/USD 1.6319
GBP/EUR 1.1058
EUR/GBP 0.9043
EUR/USD 1.4661
GBP/JPY 143.74
GBP/AUD 1.7812
GBP/NZD 2.2372
GBP/ZAR 12.147
GBP/CHF 1.6732
GBP/CAD 1.7235
GBP/SGD 2.2570
GBP/THB 53.729
GBP/HKD 12.574
