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Alistair Darling delivers an encouraging 2011 budget

 

US Dollar:

After a month and a half of drifting, the US dollar has finally made a defining bullish break. How-ever, whereas the long period of congestion would develop against notable fundamental winds (steps from China to cool its markets, a deterioration of EU stability and the first tangible traces of dollar-based interest speculation), the return to 2010’s dominant trend seemed to lack drive. Certainly, conditions have improved for the greenback over time. The relative growth and yield forecasts for the United States and its benchmark cur¬rency have developed a notable investment appeal to compliment the unit’s safe haven status. However, why would the market make its move now without a tangible catalyst to set things in motion? Looking at the headline event risk for the day, the dollar’s push can be attributed to ongoing troubles in the debate on how best to pre¬vent a Greek default along with Portugal’s downgrade (EURUSD is the most liquid pair in the world and there¬fore sets the dollar as the most readily available alternative); but a true flight-to-safety would likely have led to a meaningful unwinding of risky positioning. Yet, equities were relatively stable and other growth-sensitive assets would avoid the telltale shifting of capital. The dollar can theoretically carry itself should buying pressure build momentum; but a genuine trend would eventually require a critical support in the form of one of the major funda¬mental themes: risk trends or interest rate potential.

DATA: Unemployment claims, Fed Chairman Bernanke Testifies.

 
Pound:

Despite his penchant for pragmatism and pessimistic forecasts, Chancellor of the Exchequer Alistair Darling delivered an encouraging 2011 budget forecast report. The Treasurer lowered his five year deficit fore¬casts by 44 billion pounds to 567 billion pounds. For the 2010 fiscal year, Darling projected a deficit of 163 bil¬lion pounds that would bring the shortfall down to an 8.4 percent ratio to GDP. And, establishing the other side of that ratio, he would set his growth forecasts for 2010 at 1.0 to 1.5 percent and 2011 at 3.5 percent. All of this is considered a notable improvement; but Fitch remains skeptical. The ratings agency said the budget left the UK open to shocks and was “still slow” at deficit reduction.

DATA: Retail sales

 

Euro: 

Just a day after the France reportedly switched its stance on the inclusion of International Monetary Fund (IMF) assistance in the event that Greece requires a bailout, we have seen another surprising develop-ment in the European Union’s ongoing financial troubles. With concerns over the nation’s deficit and growth forecast, rating agency Fitch took the step of downgrading Portugal. Along with Greece, Spain, Italy and Ireland, Portugal is one of those members whose economic and financial prognosis is feeble at best. This announce¬ment effectively reminds global investors that the trouble in the euro-area is much more wide spread than just one country. And, in this context, German Deputy Finance Minister Kampeter’s suggestions that the IMF option would be a one-off for Greece only sets the region up for a very narrow ledge of support. We will see what kind of progress within the policy ranks as the two-day summit begins tomorrow.

DATA: EU Economic Summit

 

General:

• Crude oil futures were down in Asia Thursday, despite a weaker U.S. dollar, a sign that traders were still worried about the outcome of a European Union summit, which may cause the euro to slide and make commodities such as oil less attractive to investors.

 

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GBP/USD 1.4904
GBP/EUR 1.1172
EUR/USD 1.3338
GBP/JPY 136.77
GBP/AUD 1.6344
GBP/NZD 2.1133
GBP/ZAR 10.883
GBP/CHF 1.5951
GBP/CAD 1.5291
GBP/SGD 2.0965
GBP/THB 48.017
GBP/HKD 11.5762 red-down; blue-up (snap shot)

These rates are for indication purposes only.

 

For more information or to get the latest spot rates contact:

John Paul Georgiou
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+44 (0)20 7959 6851

\n john.georgiou@voltrexfx.com

 

 

 

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