Pound:
Sterling has seen a pick up in early morning trading, up 0.76% against the USD and 0.11% against the Euro. A recent article published in the telegraph over the weekend revealed that 64% of people polled by the institute of directors said they thought last week’s budget would have a negative impact on reducing the deficit. “It’s the entrepreneurs and business leaders of the UK who will make economic recovery happen. But they need confidence – confidence in their businesses and confidence in the Government’s economic policy. So it’s deeply worrying that instead of boosting confidence, the Budget appears to have had the opposite effect,” said Miles Templeman, director-general of the IOD.
Recovery in the UK is key to any substantial and long lasting move up for the pound, as this is what will stimulate investor confidence and demand. Key economic barometers will be read this morning with the release of net lending to individuals and mortgage approvals expected to be down and flat respectively. We also have BoE chief economist Spencer Dale speaking at an economic conference at 5.45pm today. I hope you had a good weekend, I helped overcome my fear of heights in the peak district on Saturday by rock climbing and abseiling in the peak district and at £45 for the day I must say it was money well spent.
US Dollar:
After incorrectly predicting a dollar fall against the Euro, Goldman Sachs along with many other strategists are raising dollar forecasts at the fastest pace since last March. The reason for this most positive outlook being a strengthening US economy, subdued inflation as well as rising stock prices, not to mention deflation in Japan and the ubiquitous euro zone credit crisis. A year after correctly predicting the currency’s decline and likening it to the fall of Rome, Royal Bank of Scotland Group Plc’s Alan Ruskin said it may soar 22 percent to $1.10 per euro if Greece defaults.
Recent unemployment figures were down on market expectation and the US labour Department will report on April 2nd that 190000 jobs were created this month, the most in three years. As this sort of data continues to flow from America it is highly likely we see dollar appreciation for some time; perhaps a longer term post recession trend. Right now the only thing that may dampen dollar demand is continued dovish sentiment from the Federal Reserve, yet with a recovery in place it looks like a rate increase will occur sooner rather than later.
For the short term, the Greenback is down at market opening following on from Friday’s euro rally and Asian trading this morning. I suspect today’s dollar decline will be short lived once investors take their profits from the euro rally.
Euro:
The Euro is trading higher this morning as the positive sentiment from Friday’s session continues through to this morning on the back of a euro bailout finally put in place. However, this rally is a slight upward blip as the outlook for the euro zone still mremains negative. No doubt we will see heavy downward pressure when investors and traders take their profits. Dennis Gartman, the economist who correctly predicted in June 2008 that commodities would tumble, said the agreement doesn’t solve the euro region’s problems. “This just pastes them over for a short period of time,” said Gartman, who publishes a daily markets commentary from Suffolk, Virginia, on Bloomberg Television March 26. “The problem of Greece is just the first. Portugal lies next, Spain behind it, Italy behind that. This is not a pretty picture.” For those with short positions on the euro, the big question is how far EUR/USD is likely to go, economist Dennis Gartman is suggesting as low as parity, Stuart Thomson, a money manager at Ignis Asset Management in Glasgow predicts the dollar will reach $1.26 per euro. Many other strategists are hovering around the £1.20 mark.
Naturally it looks like we are headed for further euro falls, the severity of which will depend on the likely hood of the contagion effect as well as the slight possibility of a euro zone nation being kicked out the single currency. Place your bets….now, is Lewis Hamilton right to publicly lambast the Mclaren’s race strategy yesterday?
Quote of the Day
“If one does not know to which port one is sailing, no wind is favorable.” – Seneca
