Pound news:
Previous trading history showed that as Sterling moved ahead on the dollar it failed to push higher on the euro, Sterling being held to €1.19 levels for quite a long period. However, as risk aversion gripped the market traders picked up Sterling in favour of the euro taking the price higher to €1.2141. This morning the price is little changed at €1.2147 but has moved lower from the high of the day at €1.2181. For the time being trading seems to be noticeably calmer than yesterday as GBP/EUR is trading at -0.15% lower for the day.
Against the dollar Sterling is trading higher at $1.5686 but such were the falls yesterday that we are still a little way off getting back into $1.57 and considerably far from the high of the week at $1.5980. The direction for GBP/USD should be interesting to watch as both central banks have announced an uncertain outlook, if the economic forecast deteriorates then it is likely the USD will take the upper hand as the investors favour the Greenback. As traders take a risk off stance GBP/AUD has benefitted by moving to $1.75 on the market. Again, today’s movements are not as pronounced as yesterday’s so the Pound may trade either side of $1.75 throughout the day. Generally speaking Sterling is trading higher against the majority of its traded pairs although this could be attributed to pairing yesterday’s losses.
US Dollar news:
Yesterday’s inflation report coupled with the U.S FOMC report caused untold amounts of movement in the FX markets yesterday. Initial trading was not too heavy but by the mid afternoon session things really took off as Sterling fell over one percent and the euro dropped by 2.3% which is a huge move in one day. The dollar surged ahead as investors took a dim view towards global growth and thus decided that, for the time being, the dollar was the safest place to be. By 16:30 London time yesterday things had started to calm down and as the dust settled Sterling was trading at $1.5663 having been up at $1.58 at the start of the day.
The euro was the biggest loser of the day as the single currency fell though support level after support level to come to rest at $1.2896. This fall translated to a -2.3% move lower which is considered excessive for one day. This morning both currencies have recovered some lost ground but the dollar still has the advantage going into today’s trading. As to be expected the dollar also moved ahead on the commodity currencies as traders dropped the Australian Dollar, New Zealand Dollar and Canadian Dollar on fears a global slowdown will reduce demand for raw materials. “Markets are now concerned about world growth, not just about the U.S.,” said Marc Chandler, global head of foreign exchange at Brown Brothers Harriman in New York. Chandler said soft data out of France, Japan and China had sparked the move back into the dollar.
Euro news:
For some time the euro was steadily moving higher as the risk of a slowdown was confined to the U.S economy. However, as other countries started to produce weak numbers it soon became apparent that the euro’s run was coming to an end. By afternoon trading the single currency had lost -2.3% and had fallen through $1.30, above which it had traded for some time. The euro dipped to $1.28 but has subsequently recovered to $1.2903 this morning, however, a 0.32% move higher is by no means a full blown recovery. In the short term traders will be weighing up this move to see if the euro is consolidating against the dollar or if, in fact, there are further losses for EUR/USD to come. The bond markets are a clear sign of the views on risk and as recession fears crept into the markets euro zone bonds came under pressure as investors took their money out of club med assets.
An article in the Telegraph this morning details that Ireland is now in the spot light as fears emerge that the full damage from the banking crisis has yet to be revealed. This should be watched closely as Ireland has been placed in the same category as Greece, Spain and Portugal in terms of high risk of default.
Quote of the Day
“Life is a great big canvas, and you should throw all the paint on it you can.” – Danny Kaye
