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Dollar oscillates between gains and losses as Fitch warms of credit rating

Pound: The British Pound tumbled lower during the overnight trade as Moody’s said the U.K. may lose its AAA credit rating, and the sterling may struggle to maintain the range carried over from the previous week as the Bank of England is widely expected to maintain its current policy in June. An analyst from the rating agency said the slower growth in Britain paired with the delay in the budget-cutting measures remains a risk for the U.K. economy, and warned that the region faces an “implementation risk” due to the scope of the austerity plan. Al¬though, a spokesman for Moody’s announced that the outlook for the U.K,’s AAA credit rating remains stable, but the slowing recovery may lead the BoE to support the real economy for most of the year as it aims to bal¬ance the risks for the region. Where the ECB event can be market moving for speculation and the nuance sur¬rounding its policy decision, the BoE announcement will likely leave the sterling unmoved. Unlike its Euro-Zone counterpart, the Monetary Policy Committee does not release a statement when the benchmark and bond pur¬chasing program are unchanged. This allows for little speculation.
DATA : Asset Purchase facility, Official bank rate and MPC rate statement.

Euro: Looking at market-based rates and the consensus forecast for economists, there seems little chance of an ECB hike at its upcoming meeting. Nevertheless, this event has the potential to generate remarkable volatil¬ity for the euro. Where money markets are actually pricing in a very slight chance of a 25bp cut and all 52 of the contributors to Bloomberg’s survey expect a hold at 1.25 percent, the real point of speculation exists with the outlook for rates beyond June. Despite the significant troubles with Greece a Reuters report suggested the EU/ IMF/ECB may not release its next support payment unless the country finances its adjustment program and other regional players, the market is still expecting Trichet and company to follow up on April’s hike in July or August. Therefore, we will be focusing on their quarterly growth and inflation forecasts while also watching the ECB President for the use of the term ‘strong vigilance’ –considered a precursor to hikes.
DATA : Minimum bid rate and ECB press conference.

:  The US dollar managed its strongest advance in over two weeks through Wednesday’s close but the currency is still lacking for the kind of momentum and conviction that can spark a true recovery effort. While we can point to the extended decline from the S&P 500, notable weakness in the euro and murmurings of no QE3 program on the horizon as catalysts for the greenback’s gains, none of these trends have any real traction just yet. That lack of a fundamental drive means the dollar will struggle to establish a meaningful trend just as surely as risk trends, gold or global equities will. That said, meaningful fundamental waves lie ahead – both with and without predictable times frames. It is only a matter of time before the global markets re-establish a clear bear¬ing and revive cross-asset correlations. Considering many of these underlying drivers involve stimulus and sen¬timent sourced from the US, it stands to reason that the dollar will offer a leading indication of the sea change.
DATA : Trade balance and Unemployment claims.

• Following the relatively mute response to the RBA rate decision earlier this week, expectations for a meaningful reaction to the May employment figures were set low. The 7,500 net increase in payrolls was much smaller than the official forecast and the first back-to-back drop in full-time jobs (the first instance since August of 2009) further curbed confidence in growth and rates. The Aussie dollar is down across the board.


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GBP/USD                        1.6420

GBP/EUR                        1.1229

EUR/USD                        1.4619

GBP/JPY                         131.48

GBP/AUD                        1.5513

GBP/NZD                         2.0026

GBP/ZAR                         11.0377

GBP/CHF                         1.3725

GBP/CAD                        1.6084

GBP/SGD                        2.0212

GBP/THB                         49.68

GBP/HKD                        12.7803


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

Senior Foreign Exchange Broker

+44 (0) 20 7959 6917      


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