Pound:
Sterling is trading lower against the USD and slightly down from yesterday’s five month high against the Euro. The pound has been given a boost this week from higher consumer inflation, improved employment data and bank of England minutes that highlighted all nine members in agreement with January’s decision on monetary policy. All nine MPC members voted in January to keep interest rates at a record low of 0.5 percent and to maintain its 200 billion pound quantitative easing scheme, as expected.
Employment data for the UK yesterday saw the number of people claiming unemployment benefit reduce by 15,200 against 2,500 forecast, helping the pound further. We have also seen the pound improve against the euro because of Euro weakness, with German investor sentiment declining and the ongoing concerns over Greek debt levels. There is also ongoing concerns over that state of public finances in Portugal, Spain and Ireland as well as growth forecasts for the Euro-zone as a whole. It is important to remember amongst this daily economic data, markets news and views the foreign exchange markets are impossible to predict because of the number of factors that can influence exchange rates.
Those looking to protect themselves may find it beneficial to trade as soon as they have a requirement to avoid the rate moving against them.
US Dollar:
The Dollar continued its upward trend against Sterling and Euro this morning as China’s potential tightening of their monetary policy sent regional equities markets down, making lower yielding currencies such as the U.S Dollar more attractive than the higher yielding Euro and Sterling. The safe haven Dollar was again a more attractive proposition in yesterday and this morning’s trading as investors also see the U.S economy recovering faster than the U.K and countries in the Euro zone.
The Dollar pushed up to 1.4060 this morning on the Euro and pegged Sterling back to 1.6180, Barclays Capital said a break of the Pound below $1.6240 would mean another 80-100 pips lower. Otherwise the bank looks for a $1.6150-$1.6460 range for the Pound going into next week. Unemployment Claims, Manufacturing Data and Crude Oil inventories due later today could all help the Dollar’s recent climb if positive. GBP/USD 1.6188, EUR/USD 1.4062.
Euro:
The Euro was down on the Dollar and still down from yesterday on Sterling but hitting resistance against the U.K currency preventing further gains. Investor reaction to news from Beijing that China may cool their economy led to speculation of losses on global equities, commodities and risk sensitive assets such as the Euro. As a result the Euro was sold off yesterday and this morning, putting further pressure on a currency already down from poor economic data and debt concerns in the region.” The Euro zone economy is likely to lag in recovery, especially against the U.S., which was something largely overlooked for the better part of last year” said Omer Esiner, senior market analyst at Travelex Global Business Payments in Washington.”
The Euro is now being targeted as one of the assets likely to underperform in 2010 based on headwinds, including Greece’s credit problems”. “The budget woes in Portugal, Ireland Greece, and Spain (pigs) are not the only consideration weighing on the Euro. European economic growth is stagnant,” said Joseph Trevisani, chief market analyst at FX Solutions. Some analysts openly floated the idea that Greece’s debt problems could spread to other Euro zone members, even eventually threatening the 16-country European monetary union.”There’s, whether it’s realistic or not, some degree of concern that failure to come to a conclusion within the EU could eventually result in Greece maybe leaving the Euro,” Travelex’s Esiner said.
“Although a very unlikely scenario, it’s still on some people’s mind.” GBP/EUR 1.15, EUR/USD back to 1.4062.
Quote of the Day
“Life isn’t about finding yourself. Life is about creating yourself.” – George Bernard Shaw
