Foreign Currency News Updates

Euro:
The euro is now under a lot of pressure from all angles as it dropped against 14 out of 16 of its major trading pairs. “There are a number of countries who could easily go down the same path, and the ability for Europe to bail out all of those economies is, I would imagine, quite limited,” said Adam Carr, a senior economist at ICAP Australia Ltd. in Sydney. “A resolution is needed quite quickly. Otherwise, the euro is going to continue to weaken.” Moody’s helped add further downward pressure on the euro by downgrading Greece’s credit rating to A3 from A2, four grades above junk status. It looks like Greece will have to ask for a bridge loan in order to pay €11.3billion in debt obligations next month. With yield spreads hitting all time highs yesterday, going to the money markets for assistance is no longer feasible. This could be make or break for the euro as the inability for finance ministers to control the Greek crisis will do little to calm nervous investors nor will it inspire confidence if another country, such as Portugal, gets into trouble.

Pound:
With the election getting ever closer all eyes are on the numbers as to whether or not we are heading towards a hung parliament. The latest survey suggests the conservatives are just ahead but not by much. Today the market will be watching the GDP figure in order to gauge how well the U.K is doing in pulling itself out of the recession. The market is looking for a quarter on quarter growth of 0.4%.

Against the euro Sterling is charging ahead, the last two days have seen the 1.15 level broken and maintained with the 1.16 level tested this morning. So far the pound has hit a high of 1.1614 but appears not to have the momentum to hold above 1.16, currently at 1.1575. Continuing pressure on the euro and improved GDP figures should see the 1.16 level maintained into next week.

Against the Greenback there is little movement as both currencies are experiencing conflicting data and sentiment. Sterling is up on the day by the smallest of margins at $1.5379 up 0.02%. This is a fractional improvement on 1.5364 at the close of equities markets yesterday. Yesterday saw unemployment rise to a 16 year high at 2.5 million, market reaction to this was somewhat muted with Sterling avoiding downward pressure on the back of that figure.

US Dollar:
Yesterday was a very choppy day in trading for all the major currencies as a raft of data from the eurozone, American, Canada and Britain all played their part in moving the currency markets. Once again it was the negative sentiment surrounding the Greece debt crisis that was the defining factor for EUR/USD. On the back of the increasing likely hood of Greek default the euro fell to its lowest level in almost a year, hitting $1.3236 at 6:46 a.m. in London from $1.3295 in New York yesterday, and touched $1.3202, the lowest level since April 30, 2009.

On the data front the results were mixed, the price in goods and services edged higher, better than market expectations whereas unemployment claims came in a fraction higher than expected at 456,000 vs 452,000. Overnight Asian trading has seen the dollar continue to make gains on the euro, still at the $1.3260 levels with 1.3200 looking like a support level for the moment. A break into $1.31 is likely to lead to a test of 1.3180.

Against the Canadian dollar, the U.S dollar has been unable to fend off parity. After hovering just above parity, the Loonie starts this morning at $1.0012.

Today sees Core Durable Goods Orders m/m and New Home Sales. Market expectations suggest a rise in Core Durable Goods Orders but a fall in New Home Sales pointing to an uneven recovery for the U.S.