Foreign Currency News Updates

Euro news:
The big news was of course the down grade of Greece. Their credit rating is now at junk status and the downgrade of Portugal will have done the eurozone no favours. These announcements lead to some very choppy trading as immediate results saw the euro take a dive in the currency markets. However, the IMF then announced it was to increase the amount of funds available to Greece by €10billlion. This news gave the euro some support thus avoiding an absolute free fall. Currently the euro is holding at levels above what we would expect for such dire news. GBP/EUR is in fact moving lower, at €1.1516 and EUR/USD is maintaining $1.3180. The market expects further falls, whether we reach $1.20 is another matter but for the immediate term $1.30 levels could be tested. Seeing as a default is trying to be avoided at all costs the euro may find stronger support levels as central banks prop up the Greeks. It is worth mentioning that the spread between German/Greek bonds is now at over 1000 basis points, which is frankly ridiculous.

“We have the makings of a market crisis here,” Neil Mackinnon, a global macro strategist at VTB Capital, told the Associated Press news agency. Germany’s willingness to help Greece out is one major concern. On Tuesday, German Chancellor Angela Merkel reiterated that Greece had to first outline further steps to reduce its budget deficit before her government would endorse the release of funds for a 45bn euro rescue package. “You have to economise, you have to become fair, you have to be honest; if not, nobody can help you,” she warned the Greek people.

Breaking news : Short-selling banned on Greek markets

Pound news:
A poor showing in macroeconomic data pushed the pound lower against the dollar and prevented any gains against the euro. After a strong showing at the end of last week and early this week, Sterling reversed its gains to finish at $1.5300. Unfortunately, Sterling weakness has prevailed this morning as current trading levels show $1.5206, should the pound slip through to the $1.51 level then we may see the $1.5180 levels tested. Not so long ago we were languishing around $1.49 which, given the current economic climate, is entirely possible for a re-visit.

Much debate focused on the threat of a hung parliament and it seemed that the markets were not entirely concerned. Despite weak data, current Sterling declines appear to be driven by eurozone events. Whilst Britain has distanced itself from the eurozone problems, the state of our finances has resulted in the U.K being sucked into the negative sentiment surrounding Greece.Against the euro it is very much a case of who falls further.

Sterling weakness derives from poor data and inconclusive election polls and as such GBP/EUR levels will be determined by which economy investors feel has further losses to incur. Two credit rating cuts for eurozone countries would in theory lead to Sterling pushing ahead towards the highs of €1.1614 yet so far the pound has been unable to advance past €1.1586, currently trading at €1.1544. With no U.K macroeconomic data out today there will be nothing to support Sterling, gains, if any, will be from further weakness from either euro or dollar news.

LibLabCon, UK is in trouble like the Greek economy (27Apr10)

US Dollar news:
Trading against the dollar started yesterday in relatively calm seas with the euro holding at the $1.33 level for mid morning to afternoon. However, by late mid afternoon the scene had changed as trading became very volatile after Portugal was downgraded, followed shortly by Greece, whose credit rating is now at junk status. Consequently the euro slumped a one-year low hitting $1.3144. By the close of equity markets the euro was trading at $1.3264 16:30GMT. This morning sees much the same as the euro slips down to $1.3180.

Against Sterling, the story was much the same as the pound suffered heavy losses, falling to $1.5300 yesterday and slipping further to $1.5219 today. Dollar strength would have been boosted by data showing consumer nconfidence is improving, the market looking for a figure of 53.6 with 57.9 being the number. 19:30 London time sees the FOMC statement which provides a clear indication of upcoming monetary policy, including the all important interest rate outlook. Many are expecting interest rates to remain low once again but even so the Fed may give hints as to the outlook for the next 6-12 months. Despite eurozone weakness, dollar gains will be limited relative to Asian currencies for as long as investors think rates will remain low.

Quote of the week
“A day is a span of time no one is wealthy enough to waste.” – Anon.