US Dollar:
The Dollar is up against both the Euro and Sterling in light trading this morning. The strength of the dollar continues after a very poor performance from the Pound on Friday. After falling over 1% in trading, the pound continues its fall against the Dollar, currently down 0.49% as of 08:42 GMT. Whilst U.K GDP was up 0.3% for the quarter, year on year growth was below market expectations thus causing the sell-off in Sterling on Friday. It is widely acknowledged that the financial situation is not as bad as the Euro Zone, however, it is unlikely we are going to see a strong recovery of the Pound as investors have thus far favoured the better performing Dollar. Yet “A pessimistic view about the U.S. economy is likely to dominate the market due to the influx of data this week, including ISM and non-farm payroll data,” said Makoto Noji, a senior market analyst in Tokyo at Mizuho Securities Co., a unit of Japan’s second-largest banking group. “This will keep a lid on the dollar.”
Pound:
Sterling is continuing to fall sharply against the Euro and USD after dropping over 2% against both currencies on Thursday and Friday last week. Official revised GDP (growth) figures out last Friday highlighted a rise in fourth quarter growth (for 2009) from the 0.1% preliminary number to 0.3%. However this did little to impress the market as GDP in the third quarter of last year was weaker than estimates increasing the overall severity of economic contraction in 2009 from 4.8% to 5%. This news indicated to the market that the UK economy performed even worse than expected last year and subsequently saw a big sell off in the pound. It could not have come at a worse time for sterling after a week already full of negative data including a sharp fall in UK investment expenditure, dovish comments from Mervyn King, further loosening in monetary policy and a fall in Nationwide house price data. The chance of a double-dip recession in the UK has now increased and investors are becoming increasingly concerned about the UK’s public finances and the political situation with a growing chance of a hung parliament come May or June when a general election is called. For now though my eyes are firmly placed on manufacturing numbers due at 9.30am and expected to remain strong at 56.3, surely there is some positive news out there outside the fact summer is coming!
Euro:
Mixed opinion about the fate of the Euro sees it trading flat against the dollar, whilst last Fridays poor economic data from the U.K keeps the Euro up half a percent on Sterling. Negative sentiment comes in the form of European Union Monetary Affairs Commissioner Olli Rehn who is likely to push Greece to deepen planned spending cuts to reduce its budget deficit. The euro weakened versus 12 of 16 most-active currencies before EU Monetary Affairs Commissioner Rehn meets Greek Prime Minister George Papandreou later today. “A rescue measure, now said to be under consideration, won’t resolve the root cause for debt problems in Greece immediately,” said Yuichiro Harada, senior vice president of the foreign-exchange division at Mizuho Corporate Bank Ltd., a unit of Japan’s second-largest lender. “Uncertainties about prospects about Greece will continue to weigh heavily on sentiment toward the region’s currency”. It is worth watching out for a short rally though, with so many short positions taken against the Euro we could see a rally as investors revise their short positions, similar to the Euro rally we witnessed two weeks ago.
Quote of the Day
“The door of opportunity won’t open unless you do some pushing.” – Anon.
