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Bernanke has few tools to heal economy

Sterling edged up against the dollar yesterday but hovered not far from eight-month lows, with further losses expected if this week’s Bank of England minutes reveal a growing view among policymakers that more stimulus may be needed. The pound was seen poised for more falls if today’s minutes show any other of the nine-strong committee joined Adam Posen in voting for more quantitative easing. Sterling now sits around the $1.5700 handle, not far from Monday’s low of $1.5632. This is its weakest level since mid-January, a level which would be expected to break in the event of a downbeat set of minutes. Gloomy data and surveys in recent weeks have stoked fears about the economic outlook, while MPC members Martin Weale and Charles Beane said in interviews last week that the risks had grown recently.
Data 09.30: MPC Meeting Minutes; Public Sector Net Borrowing.


Greek Finance Minister Evangelos Venizelos made ‘good progress’ in a second round of talks with the Euro-pean Union and International Fund aimed at staving off default, the EU said. The telephone meeting late yesterday, which followed discussions the day before, were intended to dampen concerns that Greece may miss deficit-reduction targets required to receive rescue loans. The EU statement said a ‘full mission’ will return to Athens next week after Venizolo’s talks in coming days at the IMF annual meeting in Washington. The EU economists suggest the next payment for Greece is likely to be released next month as Prime Minister George Papandreou counters investor doubts that he can avoid default. European leaders are squabbling over the terms of a July 21 agreement for a second Greek rescue and the prospect that they will be forced to channel more money to keep Greece in the currency union. The euro traded most of the day just under the 1.1500 handle, where it still currently trades.
No Major Data Due.


We have finally come to the pivotal Federal Open Market Committee (FOMC) rate decision. Many traders will be looking at this particular event only for its immediate market moving implications. The FOMC may say that while recent data are consistent with a rebound forecast for the second half of 2011, the weak labour market and high unemployment make more easing necessary. A rebound in housing is essential for restoring the net worth of US households, reviving consumer spending and strengthening the recovery. The Fed has held the benchmark interest rate at near zero since December 2008 and expanded the central bank’s assets in July to a record $2.88 trillion. The greenback is currently trading at 1.3675 against the single currency, slightly down for yesterday where it spent most of the day around the 1.3700 handle.
Data 15.00: Existing Home Sales; 19.15: FOMC Statement.


• The yen held its advance toward a post-war record against the dollar amid concern global growth is slowing and be¬fore the Federal Reserve ends its two-day meeting.     


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GBP/USD                        1.5690

GBP/EUR                        1.1475

EUR/USD                        1.3675

GBP/JPY                         119.75

GBP/AUD                        1.5295

GBP/NZD                         1.9075

GBP/ZAR                         12.208

GBP/CHF                         1.4025

GBP/CAD                        1.5600

GBP/SGD                        1.9890

GBP/THB                         47.680

GBP/HKD                        12.224

red-down; blue-up (snap shot)

These rates are for indication purposes only.


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