Pound:
Still no positive news for Sterling sellers on the market this morning as the Pound was held in tight ranges against most currencies, consolidating its recent losses after yesterdays poor UK data. Uncertainty in UK politics continues to weigh heavily on sterling, with UK polls pointing towards an indecisive election result, contributing to further investor disdain in the UK and her currency. There are real fears a coalition or minority government would not be able to effectively cut the UK’s budget deficit.
Britain’s existing government were also under fire today as early drafts of the EC’s assessment of the UK’s public finances show the Commission’s concern that the UK Treasury need to put forward a more ambitious debt reduction or face spiralling fiscal debt. Whilst the E.U can do little more than show their disapproval, the move will surely undermine Britain’s credibility and put sterling under further pressure. While some policymakers are stopping short of predicting a double dip recession, a VAT rise, slow down in retail sales recently and the possibility of a hung parliament all make it very difficult for investors to see any positives in the UK economy at present.
The CB Leading Index data for the U.K released today (an economic indicator) will do little to help the pound as most economic news has already been priced in the market, but eyes will be on the resilience of sterling and while the short-mid term outlook for the pound is not good, we may see a correction as traders cash in on recent movement. A raft of US data could serve to move sterling more than anything else today.
US Dollar:
All eyes are on the Federal Reserve today as they announce their Federal Fund Rate decision. Last time saw a 0.25% hike which was initially well received by the markets. Sentiment on the outcome is leaning towards the rate to remain where it is, however, speculation is mounting that more members of the committee will move away from keeping rates at near-zero for “an extended period”. “Investors are going to be watching the language that comes out of the (Fed) meeting,” said Carol Hurley, senior market strategist at brokerage firm Lind-Waldock in Chicago. Market opinion that the rate would remain unchanged saw the Euro climb to $1.3691 from 1.3674 in late trading on Monday.
The Dollar saw a 1% gain on Sterling yesterday as further news pointed towards the British Economy continuing to struggle with its finances. This morning sees Sterling down on the Dollar again buy only by 0.09% as many traders pull back on their long positions on the Dollar ahead of the Fed decision to keep rates unchanged. The main concern facing the dollar right now concerns the Chinese Yuan. US lawmakers are putting pressure on President Barack Obama to increase tariffs on Chinese imports after China refused to strengthen their currency amid low demand for US exports.
UK General Election 2010 – Don’t let the Tories ruin the road to recovery
Euro:
The Euro starts this morning marginally down on Sterling and trading flat with the Dollar. A German report highlighting investor confidence showed a fall for a sixth month as Europe’s largest economy is still struggling to recover. Consequently the Euro fell to a 16 month low against the Swiss Franc. “Europe’s economic growth is slowing and the sovereign debt issues are not resolved yet,” said Richard Grace, chief currency strategist at Commonwealth Bank in Sydney. “That’s going to continue to be negative for euro.”
Further downward pressure on the Euro is expected as meetings of Euro Zone ministers are failing to get results the market wants. A meeting yesterday didn’t resolve the size of future loans, which countries would offer them or the rates and durations. “Definitely, there are worries that concrete aid measures for Greece may not be announced,” said Hideki Amikura, deputy general manager of foreign exchange at Nomura Trust & Banking Co. in Tokyo.“It’s a negative for the euro.” Despite a ground-breaking agreement to provide financial aid to the Greek government, it is clear that negotiations will remain drawn out as not everyone is keen on the strategy.The long term outlook for the Euro appears very uncertain as a Greek bailout may solve problems for the short term but it opens the door for future bailouts from countries such as Spain and Portugal.
Gerald Celente on the Greek Debt Crisis interview with Helen Skopis of Athens, Greece
Quote of the Day
“Never let yesterday use up today” – Richard H. Nelson
