US Dollar:
The Dollar was up on Sterling and climbed to an 8 month high on the Euro this morning as Debt concerns in Europe increased, prompting traders to pull out of the single currency and into the safer bet of the U.S Dollar. Fears exist in the market currently that the debt issues in Greece could realistically spread to other Euro zone nations, concerns that support a move away from risk taking. “You’ve got problems in Europe with the debt situation, employment numbers that seem very weak in the U.S., and China that seems to be wanting to tighten (policy), then where’s global growth going to come from?” said Laurent Desbois, president of Fjord Capital Inc., a Montreal fund that oversees $700 million in currency investments. “Weaker global growth makes risky assets less attractive.”
The BOE announced yesterday that they would stop their money printing program (Quantitative Easing), news that boosted Sterling in the short term against the Dollar yesterday, before it was brought right back to previous levels and below as the BOE also mentioned that the program could be re-introduced at any time depending on the state of the U.K economy.
U.S employment data due today is the key market mover of note with decent figures not enough to back risk sentiment while the Euro zone remains in an uncertain financial state. GBP/USD 1.5675, EUR/
USD 1.3681.
Deflation Warning’s today and Collapse of US Economy? Few thoughts on today’s action.
Pound:
Sterling has held firm against the Euro but weakened further against the USD since yesterday’s key BoE release. The UK central bank decided to keep interest rates and QE on hold but have left the chance of further aid should the economy fall back into trouble. The bank said the programme had put pressure on the pound by flooding the money market with funds as a way to pull the economy out of its worst recession in a generation. Many interpreted the statement on the whole as “dovish” and highlighted that economic recovery in the UK is going to take a while. “Weak growth, tight fiscal policy environment will mean relatively loose monetary policy and lingering sterling weakness,” ING economist James Knightley said.
The pound has suffered considerably this week against a stronger USD and in line with sharp falls in share prices but has held against a weak Euro as investors turn on highly indebted Euro zone countries to include Greece, Portugal and Spain. In addition to PPI input data the UK is also due PPI output data (change in price of goods sold by manufacturers) data at 9.30am before manufacturing production data due next Wednesday and expected to be up 0.4%. Have a fun filled weekend.
Euro:
The Euro was at a new 8 month low against the Dollar with little movement on Sterling as fears over the debt issues in Greece now spreading to other countries in Europe persist to hamper investment there. Sterling moved up on the Euro yesterday after the BOE announced they would end their money printing QE program, but it was corrected and even sits slightly lower on the single currency after hawkish remarks were also made suggesting the program would be re-instated if any sign of poor performance in the U.K economy comes to light.
The situation in Europe is fairly dire at present, with investors becoming increasingly jittery over the Euro zone markets, the single currency taking a subsequent hit. Traders will still look for short term gains on the higher yielding Euro though, but any sustained strength will continue to be seriously hampered by suggestions of fiscal difficulties spreading to other nations in the Euro zone. Sterling is still held back from gains that the Dollar has made over the single currency as its nature as a riskier currency means it presents a similar type of investment as the Euro so in uncertain times in Europe GBP strength is also jeopardized. GBP/EUR 1.1470, EUR/USD 1.3681.
Peter Schiff Video Blog – Sovereign debt crisis and Greece defaulting
Quote of the Day
“If you think you can, you can. And if you think you can’t, you’re right.” – Mary Kay Ash
