US Dollar:
The dollar slumped to a three-year low against major currencies on Wednesday and its outlook darkened further as surprisingly soft economic data underpinned expectations that US interest rates will remain low this year. We saw the greenback drop around 1% against sterling as cable fell below the $1.65 handle. Against the euro there was yet more losses posted for the buck as EUR/USD hit $1.4935. Some analysts are calling for EUR/USD to break through the $1.50 level, even as early as this week. Global risk sentiment is being driven by recent eco¬nomic data that may favour safe-haven currencies (of which the dollar remains one) in the very short term. The main focus for today will be the interest rates decisions in Europe, but tomorrow brings the key Non-farm pay¬rolls numbers from the US, where the number expected at present sits at 185k added.
Data 13.30: Unemployment Claims 415k from 429k. Speaker 14.30: Fed Chairman Bernanke.
Pound:
Sterling continued its slide against the majors yesterday as UK manufacturing data came in weaker than expected. The number analysts were looking for was 57.0 but the number printed was much lower, coming in at 54.6. This saw an immediate drop against both the dollar and euro as the economy was shown to be strug¬gling to recover. Wednesday also saw the release of a report by the NIESR (National Institute of Economic and Social research), which predicted British gross domestic product (GDP) will grow by just 1.4% this year. This is 0.3% below the Office for Budget Responsibility (OBR) forecast, which was already adjusted down in the March Budget. Against the euro we saw a fall of around 1 cent, pushing GBP/EUR from the 1.12 handle to below the 1.11 level. In cable we also saw losses posted as GBP/USD fell from $1.6572 to $1.6479. Looking ahead to today’s trading session we have the interest rate decision by the Bank of England due at 12.00. Analysts are predicting no change and the rate to remain at 0.50% and also no further funds pumped into the UK economy. Only a few months ago, the markets were expecting the BoE to raise rates before the summer months, which would have given sterling a boost against other currencies. Now that is less likely, international players see no reason to hold sterling over other currencies where central banks may be looking to hike their own interest rates. Data 09.30: Services PMI. 12.00: UK Interest Rate expected unchanged at 0.5%, Purchase Asset facility also expected unchanged at £200B.
Euro:
The euro rose toward a 17 month high versus the dollar on speculation the ECB president Jean-Claude Trichet will signal at a policy meeting today he intends to raise interest rates this year to combat inflation. The euro also gained over 1% against sterling as we saw EUR/GBP hit 0.90. The single currency snapped a two-day decline versus the yen before a German report that economists predicted orders will rise for a third month, adding to sings European growth is picking up. Trichet will highlight inflation risks again and the links are com¬modity prices, energy prices and food prices. The euro strengthened to $1.4935, its highest level since Decem¬ber 2009. Europe’s currency has risen 1.3% over the past month in a measure of foreign-exchange rates of 10 developed nations.
Data 12.45: ECB Interest Rate expected unchanged at 1.25%. 13.30: ECB Press Conference
General:
• The Australian dollar fell for the second day against sterling and also fell for a sixth straight day versus the yen after retail sales fell 0.5% in M\arch from February, the first drop in five months.
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| GBP/USD | 1.6532 |
| GBP/EUR | 1.1106 |
| EUR/USD | 1.4887 |
| GBP/JPY | 132.68 |
| GBP/AUD | 1.5410 |
| GBP/NZD | 2.0872 |
| GBP/ZAR | 10.9844 |
| GBP/CHF | 1.4155 |
| GBP/CAD | 1.5851 |
| GBP/SGD | 2.0330 |
| GBP/THB | 49.68 |
red-down; blue-up (snap shot)
These rates are for indication purposes only.
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John Paul Georgiou
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