US Dollar:
The Dollar held steady against Sterling and Euro this morning after yesterday’s gains but was unable to extend them after Fed Chairman Ben Bernanke played down the impact of Friday’s positive U.S jobs data by suggesting unemployment could remain high for some time and the economy still had a lot of work to do before it could climb out of the recession.
On a more positive note, there is a good chance any U.S data that exceeds expectations again will put pressure on the Fed to talk about raising interest rates, boosting the Dollar. For those buying the Dollar wishing it to remain weaker the U.S official rhetoric will be welcome, and a relief to many that Bernanke maintains his stance of two weeks ago, keeping interest rates steady for now. GBP/USD little change at 1.6363 this morning, EUR/USD 1.4818.
Pound:
Sterling has failed significantly to regain recent losses against the USD and Euro as we draw closer to Darling’s pre-budget speech. Underlying concerns persist over the UK banking sector and UK fiscal heath (public purse). The pound is likely to come under pressure tomorrow when the government release the pre-budget report expected to highlight the UK’s ballooning debt as it continues to pour money into our recession stricken economy. We are also due an interest rate decision on Thursday by the Bank of England, although no change is expected allowing tomorrow’s news to be of more relevance. Paul Robinson, chief sterling strategist at Barclays Capital in London said “There is potential for downside for the UK currency if key elements upset on Wednesday, such as a deterioration in forecasts for gross domestic product growth, the fiscal deficit as a proportion of GDP or the debt to GDP ratio. Any tax (hikes) would also hamper sterling,” According to a report from Moody’s (the US credit rating agency) the UK must prove they can “whittle down” their rising deficits to avoid threats to their triple AAA credit ratings, highlighting the severity of the problem. In further news surrounding government debt, the Telegraph has revealed that that British taxpayers stand behind more than £167bn of toxic debt outside the UK in countries including the US, Ireland and the middle east thanks to the Royal Bank of Scotland.
Focusing on today we have just recently seen the release of Halifax house price data which came in better than the 0.8% expected at 1.4% highlighting continued strength in this sector, for the short term at least. We are also due key manufacturing and production data at 9.30am providing a further snapshot of a sector which with a weaker pound should be showing some growth. For those of you with requirements to buy Euros in the near term and wishing to avoid risk, a trade before tomorrow may well be a wise move.
Euro:
The Euro remained steady against Sterling and lost ground against the Dollar this morning as ECB President Jean-Claude Trichet laid out the first steps of an exit strategy from the recession, convincing few to back the single currency, while positive U.S jobs data continued to strengthen USD against the Euro. The impetus could come back to the Euro again if any market movement from the jobs data on Friday peters out as expected in many camps. Sterling was also on the back foot against the Euro after Moody’s credit rating agency said the U.K must prove they can trim deficits to avoid threats to their triple-A credit rating.
Most data releases are U.K based today, including Manufacturing and Industrial Production, as well as German Industrial Production in Europe released today that should all indicate how well the U.K and Euro-zone economies are performing respectively. GBP/EUR steady at 1.1036 while EUR/USD shows the Euro down at 1.4818.
Quote of the Day
“Conditions are never just right. People who delay action until all factors are favourable do nothing.” – William Feather
