US Dollar:
The greenback is still suffering from the fall out of Tuesdays FED statement. USD/JPY tumbled to a low of 84.51, EURUSD made fresh multi month highs over 1.34 and cable gains were only limited by similar weakness in the Pound. Ultimately any extension of QE will inherently weaken the Dollar but in the short to medium term, weakness in the US may trigger a flight to safety and further buying of the worlds reserve currency.
Data scheduled for today is focused on employment and housing with the weekly initial Jobless figures due for release and existing home sales.DATA— Initial Jobless (Sept 18), Existing Home sales (AUG)
Pound:
The British Pound suffered yesterday as the Bank of England held a cautious outlook for the U.K. The BoE min¬utes offered a dovish assessment to an already jittery market. Aside from member Sentance's dissention, the group noted that the probability for increasing stimulus going forward had increased. The BoE minutes showed the MPC voted 8-1 to hold the benchmark interest rate at 0.50% and maintain its asset purchase target at GBP 200B. Some members of the board said that the downside risks for growth has increased as they expect the economic recovery to temper off throughout the second-half of the year, and the central bank went onto say that the risks for inflation have not “materially” changed in recent months. the risks for the region. This news caused a huge drop in GBPEUR to below 1.17, its lowest level ince April. Losses against the Dollar were limited to the low 1.56’s as the US could adopt further QE themselves.
DATA—BBA home loans (AUG)
Euro:
The Euro extended its recent gains and rallied above of 1.34 on the back of U.S. dollar weakness, and the exchange rate may continue to pare the decline from earlier this year as it breaks above the August high. If the bearish sentiment towards the greenback carries into the U.S. trade, we may see the exchange rate work its way towards 1.3500. However, as market sentiment comes under pressure, we may see the Euro come off its high and the single currency’s own problems come into focus. Signs the currency bloc’s economy is slowing are still bubbling below the surface. Preliminary Purchasing Manager Index (PMI) figures are set to show Germany’s manufacturing sector – the backbone of its export-led recovery in the aftermath of the 2008 Great Recession – slowed to yield weakest in six months in September. A composite Euro Zone PMI gauge tracking both manufac¬turing and service-sector growth is expected to return an equivalent result. For now, Markets are happy to focus on the news coming from the states but the EU is still very vulnerable and we expect this to reflect in the cur¬rency very soon.
DATA— FRA/GER PMI (SEPT) FRA Business confidence
General:
The sale yesterday of €1.5 billion of Irish government debt has proved a qualified success. The auction showed there was strong demand for Irish government bonds where two offerings by the National Treasury Manage¬ment Agency (NTMA) were three and five times over-subscribed. But the price paid to secure those borrowings was expensive as investors sought a substantial risk premium. The 4.78 per cent yield – or interest rate – on four-year bonds was more than a percentage point higher than lenders received a month ago.
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| GBP/USD | 1.5658 |
| GBP/EUR | 1.1711 |
| EUR/USD | 1.3365 |
| GBP/JPY | 132.34 |
| GBP/AUD | 1.9427 |
| GBP/NZD | 2.1402 |
| GBP/ZAR | 11.037 |
| GBP/CHF | 1.5475 |
| GBP/CAD | 1.6151 |
| GBP/SGD | 2.0771 |
| GBP/THB | 47.84 |
| GBP/HKD | 2.1445 red-down; blue-up (snap shot) |
For more information or to get the latest spot rates contact:
John Paul Georgiou
Senior Foreign Exchange Broker
