Pound:
The pound has continued it’s rally this morning reaching highs of 1.1290 against the Euro and 1.5245 vs. the US Dollar. New opinion polls are pointing to a reduced chance of a hung parliament with a poll by Metro/Harris showing the conservatives have a 10-point lead over Labour, providing them with enough to gain a majority vote in an expected election next month. “The opinion polls showing decreasing chances of a hung parliament are providing some relief for sterling this morning,” said Ian Stannard, senior foreign exchange strategist at BNP Paribas. Despite this positive news, concerns over the make up of our economy and the ability to reduce the public deficit will continue to worry investors and prevent any major rally for sterling.
The possibility of a credit downgrade for the UK within a year remains a possibility unless a clear strategy is made after the election on how the deficit will be tackled. For now though the pound is trading at an attractive level for sellers before the Easter break.
I am looking forward to some quality relaxation over the long weekend, and there is no better place for me to go than a friend’s hidden retreat in France – www.maisonmaurice.co.uk. Have a great weekend.
US Dollar:
As markets start to recover the ‘safe-haven’ benefits of the dollar are no longer a priority as investors look elsewhere for better returns. The dollar traded near a one week low against the euro, trading at $1.3510 per euro as of 7:09 a.m. in London from $1.3510 in New York yesterday, the low of the day being $1.3561, the weakest since March 23. It has to be said that this low is not too significant, USD/EUR is still trading within ranges for the moment and further falls are expected for the euro.
Asian economies are the main reason as to why demand for the dollar has subsided, “Japan’s rebound is doing OK, while China and India are supporting an overall recovery in Asia,” said Masanobu Ishikawa, general manager of foreign exchange at Tokyo Forex & Ueda Harlow Ltd. “There’s a bias for the dollar and the yen to weaken.” Looking at U.S. dollar and Yen as a pair, the Greenback is doing well, touching highs last seen on Jan. 8. The reason for this dollar strength comes from Japanese institutional investors buying the dollar, this morning being the start of a new fiscal year in Japan.
Deflation is a big issue in Japan resulting in rates remaining low and as U.S. interest rates are likely to rise sooner or later, the bias is to buy the dollar.
Unemployment figures are out 12:30GMT which is likely to show both a fall in initial jobless claims as well as a drop in those receiving unemployment insurance.
Euro:
A relatively quiet day on the euro front as the long weekend sees many traders trimming their positions. Mixed news from Germany will have scrambled trading strategies after German retail sales fell by 0.4%, more than the market was expecting. This is not such great news as it would suggest that private consumption will hamper the recovery of the exports in the eurozone. However, unemployment figures were down unexpectedly by the biggest amount since March. With the labour market and sales figures closely linked, we are likely to see a boost in retail sales in the coming months off the back initial improved unemployment. Unfortunately the pick-up from Germany may be over-shadowed by Greece’s problems.
Demand for Greek bonds is continuing to fall which will dampen demand for the Euro. With Asian markets recovering well, investors with a slight appetite for risk will head straight for Asian stocks over Greek bonds. This morning sees the euro down against Sterling and level on the Greenback, Sterling taking the lead at 1.1267 up 0.28% with the dollar trading absolutely flat at 1.3505 which is no change on the day. There is no significant macroeconomic news for the Euro Zone today so any changes are expected to be kept to a minimum. With reference to the Asian recovery, this weekend sees the Malaysian Grand Prix, one of a hand full of races in the Far East. As a location and economy, if it’s good enough Mr Ecclestone and his circus then it’s good enough for institutional and retail investors alike.
Quote of the Day
“No one grows old by living, only by losing interest in living.” – Marie Beynon Ray
