Pound news:
Sterling has recovered well following the warning from ratings agency Fitch. In fact, the support we are seeing for the Pound is as a result of the market viewing the initial sell-off as an overreaction. “The market has concluded that the reaction to Fitch was overdone because it was not new news at all,” said Jane Foley, research director at Forex.com. Consequently having dipped into the $1.43 level earlier in the week, Sterling is now at $1.4582 to buy which is hardly changed from a price of $1.4577 at equity market close yesterday but up 0.33% today nevertheless.
Some very important announcements are due from midday onwards, there is the possibility of a Monetary Policy Committee statement on interest rates if the rate is to change, however, for the time being the market is expecting rates to stay the same. Against the euro Sterling is unchanged overnight in the low €1.21 area. Having hit a low of €1.2095 today it would appear that Sterling has now achieved the momentum to hold above €1.21. Anything the market doesn’t like from the forthcoming ECB meeting later today could push Sterling higher. Concerns about the deficit figure will remain but until the emergency budget Sterling gains should be treated with a little caution as this is not likely to be a long term upward trend just yet.
Chaney Sees Credit-Rating Cut Risk for U.K., U.S., Japan
US Dollar news:
Data showing growth in the Asia-Pacific area has improved demand for higher yielding currencies and as such the dollar finds itself down this morning against the Yen but also Sterling and euro. The improved market sentiment for riskier assets as well as commodity lead currencies sees AUD, CAD and NZD all making gains on the U.S dollar.
The Loonie in particular is up over half a percent, not huge gains but now trading into the mid $0.96 levels. The euro is also holding firm against the dollar as it is little changed overnight from $1.2042 at 16:30 London time yesterday to trade at $1.2026 this morning. Sterling is also making gains on the dollar having tested $1.46 today but currently just off that level to trade at $1.4581.
On the Macroeconomic front it would appear that nothing out of the blue was said by Federal Reserve Chairman Ben Bernanke. However, today is another significant day for the U.S economy as the trade balance figure and unemployment claims are out at 13:30 London time. Both these economic indicators have the power to move the markets with unemployment being the thorn in the side of U.S growth, remaining “stubbornly high”. Unemployment claims are expected to be at 447,000 whilst the trade balance is expected to be – $40.8billion.
Gross Says Job Growth ‘Anemic’, Unemployment May Rise
Euro news:
The CEO of BNP Paribas announced this morning that the concerns over the eurozone and banks is “over done” and the idea of a eurozone country defaulting is not on the agenda. Considering he is the CEO of a eurozone bank this statement is not that surprising but one gets the feeling these statements are to calm the markets with little economic evidence to support it. As we have seen the figures for single currency nations that are in trouble paints a different picture. However, for the time being nothing has spooked the markets to warrant a sell-off and consequently the euro has climbed back to $1.2017, a fraction lower than $1.2042 yesterday.
The EUR/USD should be watched closely though as 13:30 London time is when the ECB press conference is held. One would assume that the general tone will be one of calm and order to restore confidence in the eurozone but the markets will be listening closely for any hints of things to come.
Hungary and Bulgaria are two countries that have caused problems recently so any news on them may weigh on the euro. Let’s not forget that continuing to bubble away under the surface is the fact that there is a legal challenge in the German courts over the legality of providing aid by Germany to bail out other EU members.
Quote of the Day
“Every man is the architect of his own fortune.” – Sallust
