Pound:
Sterling has failed to recover significantly from major losses in the last week as the Bank of England holds interest rates and QE at their current levels.
In more downbeat news for the UK, the Independent reported that fears are growing of a double dip in the UK housing market after Halifax announced a 1.5% drop in house prices between Jan and Feb hampered by slow economic recovery. This is particularly bad for the UK as the housing market and consumer spending have been key contributors to growth in previous years, leaving prospects for sterling weaker.
In other news the Telegraph stated the obvious with regard to the fact that the UK would still be in a recession without the £200bn Bank of England QE programme. The article went on to say that the BoE measures have boosted GDP by 2-3% but it had not worked well enough to kick start a strong recovery.
Investors continue to be concerned over the UK political situation and our public deficit which according to Alistair Darling’s speech (that I saw yesterday) will not be tackled until next year if the Labour party are re-elected, because of the vulnerable stage of economic recovery we are currently in. This of course does little to help the pound in the short term. Have a great weekend and make sure it counts!
US Dollar:
Despite reaching a two week high and a strong bond sale, investors were still unconvinced about the plans for Greece. As a result the Dollar edged up in Thursday trading. Overnight the Dollar fell against the Euro, this was mainly down to comments made by Japanese Finance Minister Naoto Kan. As of late the Yen had been gaining strength as investors favoured the higher yielding currency. However, Kan’s comments suggested there would be an intervention should the Yen become too strong. This gave traders the excuse to sell the Yen against both the Dollar and Euro. Thus far the dollar has fallen over 4.0% against the yen in the past two weeks, causing concern among Japanese exporters.
US non-farm payroll numbers are out today at 13:30GMT which will dictate the direction of the market into the weekend. “Although many economists are looking for a sharp decline in payrolls, traders will most likely downplay the weakness by attributing it to temporary layoffs in the weather sensitive construction and transportation industries,” said Global Forex Trading analyst Kathy Lien in New York.
Euro:
The Euro looks to be on shaky ground even though yesterday’s Greek bond sale was three times over-subscribed. The main cause for concern among investors is whether or not the Government will be able to meet its tough deficit reduction targets. “As more thought is given to (the Greek plan), there is more realization that this is by no means the end of the story,” said Ron Leven, a currency strategist at Morgan Stanley in New York.
The euro was down at $1.3572, from $1.3589 by close of play in
New York on Thursday when it lost 0.8 percent. It had risen above $1.37 following a robust response to a Greek debt auction on Thursday. But it fell after the chief of the European Central Bank (ECB), Jean-Claude Trichet, said recovery in Europe would be uneven, squashing any outside chances of a near-term rise in record low euro zone interest rates. Investor confidence can, once again, be accurately summed up in the record number of Euro futures contracts short sold. For those of you with a little cash to spare, a serious thought is being given to the idea of a Greek island sell-off to raise funds for the Government as many islands are state owned. Prices start at $1,300,000……
Quote of the Day
“If you wait, all that happens is that you get older.” – Larry McMurtry
