Dollar shows mixed progress across majors as debt troubles continue
• Euro outlook remains Bearish• Moody’s talks up BOE Rate Hike• Dollar shows mixed progress across majors as debt troubles continue• Australian Dollar softens as bank sees ‘More Time’ for Inflation
Pound:
Yesterday Moody’s announced that it expects the Bank of England to lift the benchmark interest rate off the record-low later this year. The ratings agency anticipates the MPC to deliver a 25bp rate hike by the end of the year, but sees borrowing costs increasing by 100bp in 2012. As interest rate expectations pick up, speculation for a rate hike should help to prop up the sterling, but the BoE policy meeting minutes due out later this week could undermine market expectations should we see growing shift within the committee. As the UK faces slow¬ing recovery, the central bank is likely to endorse a wait and see approach for monetary policy, but the policy statement could reflect an increased willingness to expand quantitative easing further as the board aims to stimulate the ailing economy. The BoE minutes are scheduled to release the minutes on Wednesday and com¬ments are likely to heavily influence the British Pound as market participants weigh the prospects for future pol¬icy.
No major data due today.
Euro:
Governing Council member Yves Mersch said that the ECB is not looking at a ’series of rate hikes’, suggesting that the central bank will carry out a wait and see approach for the remainder of the year, and went on to say that the emergency measures taken during the financial crisis will be carried out as long as needed according to an interview. With interest rate expectations off the board, the fundamentals are certainly not there to prop up the single currency, and the EUR/USD may threaten the advance from earlier this year should European policy makers fail to restore investor confidence. Nevertheless, Germany said the EU will reach an agreement for Greece’s second bailout package as the group is scheduled to hold another summit on July 21, but the renewed efforts may do little to change the near term outlook for the euro as the ongoing stress within the European fi¬nancial system weighs on the economic recovery.
Data 10.00: German ZEW Economic Sentiment.
Dollar:
Credit rating agency Moody’s said yesterday that the US should scrap its debt ceiling entirely. The legislative cap creates ‘periodic uncertainty’, Moody’s argued, suggesting that America could adopt a ‘fiscal rule’ to restrain deficit build-ups instead. The possibility of America defaulting on its debts is ‘off the table’, US treasury secretary Timothy Geitner claimed yesterday in an optimistic statement. Yet the White House later rebuffed a Republican plan to force future federal governments to balance their books, showing that progress in the crunch talks re¬mains slow. The Fed has until Aug. 2 to approve the debt plan, when the country will no longer be able to pay its bills.
Data 13.30: Building Permits.
General:
• The Reserve Bank of Australia’s relatively dovish comments at its July meeting, continuing its commen¬tary to keep monitoring inflation, partially cut the Australian dollar’s morning gains.
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GBP/USD 1.6110
GBP/EUR 1.1390
EUR/USD 1.4150
GBP/JPY 127.40
GBP/AUD 1.5120
GBP/NZD 1.9000
GBP/ZAR 11.22
GBP/CHF 1.3220
GBP/CAD 1.5395
GBP/SGD 1.9600
GBP/THB 48.15
GBP/HKD 12.55
red-down; blue-up (snap shot)
These rates are for indication purposes only.
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John Paul Georgiou
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