US Dollar
The dollar remained range bound yesterday as the markets looks for a catalyst for it to break the current range. The catalyst that can exact the greatest influence over the dollar and generally the broader finan¬cial market is risk appetite trends. The S&P 500 as our proxy for investor sentiment posted a very modest 0.28 percent loss for the day that mirrored the European market before it and transferred to the opening activity of the Asian session after it. Even Fed Chairman Ben Bernanke appearance in front of the House Budget Commit¬tee yesterday failed to create much activity on the FX markets where he reaffirmed his view and that of the FED that for now, inflation was comfortably in check despite rising commodity prices overseas.DATA : USD initial Jobless FEB 05, USD Monthly budget (JAN)
Pound
Wednesday’s trading was choppy for the pound with the release of the December visible trade balance which unexpectedly printed its largest deficit on record at 9.2 billion pounds. Normally, this would have been enough reason to unload sterling – especially given the economy’s dependence on capital inflows with the cur¬rent uncertainty surrounding growth. Yet, with the BoE rate decision scheduled for today, traders are distracted. While austerity is threatening to pull down an already struggling recovery, market participants are nonetheless convinced the central bank is on the path to a near-term rate hike. That is highly unlikely for the upcoming meet¬ing however, as former BoE member Tim Besley expects the central bank to curb its outlook for price growth. A downward revision in the BoE’s quarterly inflation report (which is due out on February 16) could also bear down in interest rate expectations. In light of the recent developments, there could be a growing split amongst the committee as Adam Posen sees scope to expand quantitative easing further, and the central bank may look to maintain its wait-and-see approach throughout the first-half of the year as policy makers struggle to meet on common ground. As the near-term rally in the GBP/USD tapers off ahead of 1.6300, the exchange rate may continue to consolidate going into the end of the week, but the pound-dollar should hold support at 1.6000 as we expect the currency market to show a bullish reaction to the BoE rate decision.
DATA : BOE interest rate decision (FEB), GBP Manufacturing production MoM/YoY (DEC)
Euro:
The Euro rallied to a high of 1.3743 yesterday as policy makers plan to take additional steps to strengthen the regions financial system, but the exchange rate may hold steady throughout the North American session as it maintains the narrow range from earlier this week. European Central Bank board member Chris¬tian Noyer said that the commercial bank stress test were conducted too quickly and failed to target all the lend¬ers within the region while talking to lawmakers in Paris, but went onto say that the new EU stress test will avoid the mistakes made earlier as policy makers aim to restore investor confidence. However, as the group fails to deliver a solid solution to address the sovereign debt crisis, the EUR/USD may trend sideways ahead of the EU Summit in March, and we may see the single-currency face additional headwinds over the near-term as the risk for contagion intensifies.
DATA : FRA/ITL Industrial production MoM/YoY (DEC)
General:
Oil prices rose in Asian trade today on persistent concerns over the situation in Egypt where the em-battled government has warned of a military crackdown against protesters. New York's main futures contract, light sweet crude for March, climbed 32 cents to $87.03 a barrel and Brent crude above $102. .
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| GBP/USD | 1.6050 |
| GBP/EUR | 1.1767 |
| EUR/USD | 1.3636 |
| GBP/JPY | 132.80 |
| GBP/AUD | 1.5989 |
| GBP/NZD | 2.0909 |
| GBP/ZAR | 11.6722 |
| GBP/CHF | 1.5456 |
| GBP/CAD | 1.5456 |
| GBP/SGD | 2.0540 |
| GBP/THB | 49.0829 |
For more information or to get the latest spot rates contact:
John Paul Georgiou
Senior Foreign Exchange Broker