Pound:
The pound saw a good boost late yesterday against the Euro “printing” above 1.12 and 1.53 vs the USD. This morning however has seen some renewed weakness for the pound losing over 0.5% against the Euro and 0.75% against the USD aided by comments from Andrew Sentence (MPC member) who yesterday confirmed “Britain requires prolonged fiscal tightening to return its budget deficit to a sustainable level” sending out signals on big spending cuts forecast from the public sector. He also went on to say “I have to recognize that there is some risk of a double dip recession but it is not the central forecast, we would have to see some factors that would bring that about.” comments that have not been completely welcomed by the market.
As I have mentioned before, for now it looks as if sterling is trading sideways whilst political and economic matters continue to heat up heading towards the summer months. In theatre news I saw “the little dog laughed” at the Garrick theatre last night, a very good production and well worth seeing, I didn’t just go to see the stunning Gemma Arterton (Bond girl) I promise! Have a great weekend.
US Dollar:
The USD/EUR was subject to volatility yesterday as mixed signals emanated from the Euro Zone, at one point the Euro dipped to $1.3586. The day also saw a brief rally against the Dollar, however, it is unlikely the rally will see any momentum as Brown Brothers Harriman said in a report, “lingering concerns and mixed signals as to how to resolve the Greek crisis will benefit the greenback. We favour selling the euro on the rallies, with the recent price action indicating that $1.3800-$1.3750 are good selling levels.” The Dollar received a further boost as rumours suggested that the Federal Reserve may raise the discount rate, charged on direct loans to banks, before the start of the next two-day meeting on April 27.
There is a good chance we will see further Dollar strength as investors are starting to favour the Dollar over crude oil. Demand for oil in the US has edged lower, and the recent strength in the Dollar has seen many speculators sell oil in favour of Dollars. Ahead of a three day weekend in Japan, the Dollar edged higher as investors covered positions. A strong performance from the Dollar in the Asian markets can often be seen as a precursor for trading in U.K then U.S trading hours.
Euro:
Put simply, if the Greek Prime Minister cannot make his mind up about the short term prospects for Greece then the outlook looks poor at best. Greek Prime Minister George Papandreou told reporters Thursday that Greece would ask for a stand-by credit facility at next week’s summit. Several hours later, Papandreou told a televised cabinet meeting that Greece isn’t seeking aid, neither from the EU nor from the International Monetary Fund. It is this confusion that is putting any Euro Zone recovery on ice and further cementing the case for short selling the Euro.
Further weakness in the Euro has come from investors and speculators realising that any Euro rally previously “was founded on anticipation of a Greek deal rather than an actual package, [as such] they will find little resistance in driving back down the euro toward its February lows of $1.34,” said Ashraf Laidi, chief market strategist at CMC Markets in London. Strength and security is synonymous with Swiss finances and banking, as a result the biggest winner this morning is the Swiss Franc, the Euro hovering dangerously close to a 17-month low at CHF1.4455.
Results released this morning from a survey in Greece shows a large majority of Greek nationals see the crisis lasting for two years, with many Greeks very disappointed with the budget cuts that Greece are suggesting.
Quote of the Day
“A life that hasn’t a definite plan is likely to become driftwood.” – David Sarnoff
