US Dollar:
This week so far has seen the dollar trading blows with the Euro and Sterling as a constant flow of news changes the sentiment regarding the Euro, Dollar and Sterling. Yesterday saw the Dollar soften as comments by Federal Reserve Chairman Ben Bernanke outlined that interest rates will remain low for the time being as the global economy, whilst showing signs of recovery, is still very fragile. These comments from the Fed momentarily overshadowed the problems in Greece as the Euro climbed 0.3% yesterday. Weaker than expected house sales in the US also dented the Greenback’s advance on its major trading pairs. However, as to be expected, the Greeks have thrust themselves back into the limelight with more bad news and as a result the Dollar is up against the Euro by 0.36% in morning trading. Comments by Bank of England Monetary Policy Committee member Adam Posen echoed Mervyn King’s negative outlook for Sterling which sees the pound down 0.62% against the Dollar this morning. GBP/USD 1.5310 EUR/USD 1.348
Pound:
Sterling fell yesterday by over half a cent against the Euro and remains weaker today in addition to being down 0.61% against the USD. More news and views from the Bank of England yesterday helped weaken the pound with MPC member Adam Posen saying that the central bank would expand its quantitative easing programme if necessary. This tone surrounding QE was very similar to what Mervyn King spelled out as he delivered the inflation report hearings on Tuesday, which subsequently encouraged investors to dump sterling. The fact that our central bank (UK) is prepared to continue QE signals that a weak economy (taking time to recover) is likely to keep monetary policy loose for a longer period and removing the chance of interest rate hikes anytime soon. To make matters worse King is due to speak about the future of banking at the banking commission hearing in London at 9.30am which could rattle the markets further. We are also due preliminary investment numbers at the same time and retail/wholesale sales numbers at 12.45pm.
Euro:
Problems in Greece have now escalated to riots in the street as a result of proposed budget cuts. To add further fuel to the fire a leading ratings agency has threatened to downgrade the country’s long-term rating to near junk status. This news comes after Fitch ratings agency downgraded four major Greek banks. “The euro has tried to strengthen this week, but keeps getting knocked back by deteriorating news surrounding Greece,” said strategists at Royal Bank of Scotland. This heavy downward pressure will see Euro futures contracts being short sold as investor confidence leaves the Euro Zone. However, if some good news is to come from the Euro Zone in the short term then we could see a rally, similar to last week, as traders will look to revise their short positions. This will no doubt cause some volatility for the Euro in the coming weeks.
Quote of the Day
“You cannot always have happiness, but you can always give happiness.” – Anon.
