US Dollar
The prospects for the Buck remain quite dark, not only is it having to contend with the prospect of further QE, The topic of reserve diversification away from the USD has also been resurrected, with the slide in the buck rehashing concerns that the single currency is undergoing a major secular decline. Nevertheless tech¬nical indicators are showing the Dollar in oversold territory so a correction could be due soon. Further weakness is also not guaranteed as various members of the FED are stating divergent views on the economy and on whether the Fed should buy more Treasury bonds (which is known to some as quantitative easing) to push down long-term interest rates and stimulate growth. Ultimately the FEDs upcoming actions and attitude on US growth will play a huge part in the direction of the Dollar so we will be watching closely for clues.
DATA—US GDP Annualised 2QT, Jobless Claims.
Pound:
Sterling slipped from a high of 1.5870 during London yesterday as a report by the Bank of England showed mortgage approvals in the U.K. fell for August after expanding in the previous month, while consumer credit unexpectedly slipped GBP 0.1B during the same period amid forecasts for a GBP 0.1B rise. Given the ongoing weakness within the real economy, the BoE may increase its willingness to expand quantitative easing over the coming months, and speculation for further easing could lead the GBP/USD to retrace the advance from earlier this month as investors weigh the prospects for future policy. With this in mind, the market is hesi¬tant to push the British pound one way or the other until the Central bank makes its position and intentions clearer. This morning, UK House Prices surprised to the upside in September according to a report from the Nationwide Building Society. The report shows a modest gain of 0.1% so will not keep traders attention for long.
DATA—No Data Scheduled.
Euro:
The Euro has posted a stunning recovery against the major currencies since the beginning of the month, but the single currency’s breakneck rally may falter as civil unrest becomes widespread across the conti¬nent. Weighing on the single currency is story that the ECB are looking at winding down the extra ordinary stimulus packages. A string of ECB governors have said this week that emergency support must be withdrawn soon, signaling a phasing out of the unlimited lending facilities that have acted as life-support for banks of high-debt states. This puts the ECB on a very different tack from the central banks of the US, Britain, and Japan, which have abandoned "exit strategies" and begun to prepare for fresh quantitative easing as a precaution against a possible growth relapse. "The ECB seems set on a pre-ordained course, oblivious to other subtleties," said Julian Callow from Barclays Capital. This has enabled the Dollar and Sterling to halt the rally but not really managed to post a serious reversal yet.
DATA—EUR GER Unemployment change, EUR CPI MoM/YoY (SEP)
General:
• The Irish Government has this morning announced a final estimate for the cost of the Anglo Irish Bank bailout of at least €29.3 billion and has said AIB will require an additional €3 billion in funding. The Cen¬tral Bank said the final cost may rise by another €5 billion to €34.3 billion in the event of unexpected losses. This would bring the cost of the entire bank bailout to just under €50 billion.
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| GBP/USD | 1.5853 |
| GBP/EUR | 1.1641 |
| EUR/USD | 1.3610 |
| GBP/JPY | 132.02 |
| GBP/AUD | 1.6379 |
| GBP/NZD | 2.1495 |
| GBP/ZAR | 11.045 |
| GBP/CHF | 1.5949 |
| GBP/CAD | 1.6368 |
| GBP/SGD | 2.0873 |
| GBP/THB | 47.90 |
| GBP/HKD | 12.31 red-down; blue-up (snap shot) |
For more information or to get the latest spot rates contact:
John Paul Georgiou
Senior Foreign Exchange Broker