US Dollar:
Another quiet day on the Dollar front as a lack of macroeconomic data and no serious concerns means the Greenback is priced accordingly. The dollar did appreciate against the Chinese Yuan as China hinted at curbing their huge growth amid escalating inflation worries.
Sterling fell against the Dollar considerably after poor manufacturing data, however it recovered somewhat, the Dollar advancing to $1.4961 per pound from $1.4978 yesterday. On a technical note, the failure of any upside momentum from the pound may see the $1.4870 support level tested. Unemployment decreased in nine U.S. states in January, led by an improvement in Michigan that demonstrates factories are driving the economic rebound. This is by no means cause for celebration, however, unemployment is the major concern for the US so news on the labour market should be carefully watched.
Pound:
Sterling remains within similar ranges to yesterday afternoon against the USD and Euro as UK economic and political sentiment remains poor. The pound was hit again yesterday by weak economic data with manufacturing and industrial production numbers showing falls of –0.9% and –0.4% respectively.
According to the National Institute of Economic and Social research the economy still grew by 0.3% between Dec and Feb but they also said that although the recession is over, the UK would not be back on track to pre-crisis levels for another two years, leaving the country in a period of “depression” (strong words). We are fairly short on economic data the rest of this week until the rightmove house price data, claimant count change and MPC minutes are released next week.
This morning sees the release of the Gfk consumer inflation expectations. This data can manifest into real inflation, primarily because workers tend to push for higher wages if they feel prices will rise. We also have MPC member Spencer Dale delivering a speech tomorrow at Trinity College, Cambridge with the market looking for clues on future monetary policy. Hold tight there could be more sterling weakness to come…
Euro:
Despite the Greeks committing to financial belt tightening through their austerity package, it is likely the Euro will experience further downward pressure as other EU nations must follow suit before investor confidence fully returns to the Euro Zone.
Many of the far Eastern currencies are taking the lead, the Yen especially, as traders exit riskier positions for the time being.
In short term news, we may see the Euro gain on the Swiss Franc as the Swiss National Bank are likely to keep rates at an all time low. It is likely we’ll see further downward pressure on the Euro as the recent problems have resulted in Euro Zone financial policy requiring a re-write in order to avoid these problems again. German finance minister Theo Waigel, the driving force behind the creation of the bloc’s Stability and Growth Pact, told Reuters on Wednesday that a watering down of EU budget rules in 2005 had been a “big mistake” and said those rules must now be given teeth again.
Gilles St. Paul on ‘Exiting the Crisis Ireland, The Eurozone and the EU in 2010′
Quote of the Day
“One of the pleasantest things in the world is going on a journey.” – William Hazlitt
