Pound news:
Sterling took heavy losses against the dollar prior to the FOMC meeting in America as it was generally thought that the Fed will not implement further monetary easing despite a slowdown. This sentiment took Sterling over a percent lower in yesterday’s trading dipping to $1.5720, however despite still trading in the negative, -0.36%, Sterling has recovered some lost ground to target $1.58. The next 24/48 hours will indicate whether $1.60 is a realistic target or a flash in the pan.
With the States announcing their outlook it is now our turn and at 10:30 we have the BoE inflation report as well as a speech from Mervyn King. This will no doubt move the markets but moves in Sterling can often be a knee jerk reaction before the market decides on a long term prognosis.
Against the euro Sterling has used the risk off sentiment to edge higher, testing €1.2110 at the high of the day. A look at the market shows the Pound has retreated slightly to €1.2090 but positive news from the BoE will hopefully push Sterling over €1.21, however, as the tone seems downbeat for the moment we may see Sterling under pressure as there has been little by way of damaging news for the euro of late. By the same token the move away from commodity currencies sees GBP/AUD trade at $1.7460 and up 0.67%, the high of the day coming in at $1.7505.
US Dollar news:
We start this morning with a very mixed trading pattern as the news from the Federal Reserve meeting has put a spanner in the works in terms of global recovery. The Fed has acknowledged that the recovery is slowing down and has moved to prevent it’s huge balance sheet from shrinking in an attempt to kick-start the economy. The long term outlook will weigh on the dollar as there is no chance of a rate hike any time soon, however, this will be counteracted by support for the dollar if the global economy slows as a whole. It is likely that over the coming months we will see market volatility in USD vs the commodity lead currencies depending on whether the slowdown is occurring in the states or globally. As it is AUD has taken a noticeable fall against the dollar, down -1.20% so far, CAD and NZD also suffering as traders avoid currencies that are closely linked to global growth and demand. “With the outlook for the U.S. and Chinese economies becoming uncertain, growth sensitive currencies are unlikely to draw strong buying interest,” said Hiroshi Higa, senior strategist in Tokyo at MoneySquare Japan Inc. The risk off sentiment has also seen the euro dip to $1.3150 and now approaching a 1% fall for the day however this price is slightly higher than where we left EUR/USD yesterday.
Sterling is also down but the move is not quite as pronounced, the Pound now trading on the $1.58 mark and as of yet undecided which way to go.
Euro news:
There has been little news emanating from the euro zone that has been to the downside yet this morning the single currency finds itself on the back foot against Sterling and the U.S dollar. Sterling has made some useful gains although at €1.2090 we are not in uncharted territory.
Against the U.S dollar the euro is under quite some pressure as recent levels in the high $1.31 region have now translated into the mid $1.30’s. Whilst a substantial move on the day it has hardly shocked the markets as many still feel the euro is due to move lower against the dollar. In a complete about turn for the euro, some traders are anticipating some euro strength as growth prospects might outstrip that of America. This is a slightly longer term outlook and very much speculative but for the time being a big clue towards market sentiment can be seen in the EUR/JPY price, the euro down -1.24% on the day as traders have dumped the single currency for the much safer Yen as risk aversion is the theme of the day.
Quote of the Day
“Only Robinson Crusoe had everything done by Friday” Anon
