US Dollar: The U.S. dollar gained ground against its higher-yielding counterparts on Tuesday as investors scaled back their appetite for yields, while the Japanese Yen marked a sharp rally across the board following a drop in carry interest. As risk aversion flows back into the currency market, the low-yielding currencies should continue to outperform throughout the day as equity futures foreshadow a lower open for the U.S. market, and risk sentiment is likely to dictate price action going into the middle of the week as the economic docket starts to liven up over the next 24-hours of trading. As the rebound in the U.S. dollar gathers pace, the recent price de¬velopments suggests that the larger reversal we’ve been waiting for may not be too far off, but it’s certainly too early to call for a large rally in the USD as the Fed looks to keep the benchmark interest rate close to zero for most of 2011.
DATA : Non farm employment change and Non manufacturing change.
Pound: The British Pound broke out of the narrow range carried over from the previous week as manufacturing in the U.K. slowed more than expected in April, and currency traders may show a bearish reaction to the Bank of England interest rate decision later this week as the central bank maintains a cautious outlook for the region. Bank of England Governor Mervyn King argued that the “economic consequences of high-level indebtedness now would become more severe” if the benchmark interest rate was raised from its current level, and warned that the overwhelming budget deficit “poses massive macro-economic challenges” while testifying in front of the European Parliament in Brussels. The dovish tone held by the central bank head suggests that the majority of the MPC will continue to carry out its current policy going into the second-half of the year, and the British Pound certainly remains at risk to face additional selling pressures over the near-term as interest rate expectations falter. According to Credit Suisse overnight index swaps, investors are now pricing borrowing costs in Britain to increase by slightly more than 25bp over the next 12-months.
DATA : Nation wide HPI and Construction PMI.
Euro: The Euro struggled to hold its ground during the overnight trade even as producer prices in Europe ex¬panded at the fastest pace since September 2008, and the single-currency could be carving out a top ahead of the European Central Bank interest rate decision as market participants speculate the Governing Council to adopt a neutral policy stance for the coming months. The ECB is widely expected to keep the benchmark inter¬est rate on hold in May, but central bank President Jean-Claude Trichet may continue to soften his hawkish tone for monetary policy as higher interest rates exacerbates the risk for contagion. Market participants are now pric¬ing borrowing costs in the euro-area to increase by more than 7bp over the next 12-months, and speculation for higher interest may continue to prop up the single-currency as the ECB toughens its stance against inflation. In turn, the EUR/USD may continue to trend sideways over the next 48 hours of trading, but the press conference with Mr. Trichet should set the tone for future price action as investors weigh the prospects for monetary policy.
DATA : No major data to be released today.
General:
The RBA’s rate decision shook the Australian dollar early in Tuesday’s trading session. Though the group left the benchmark lending rate unchanged, the statement that followed reflected a more heightened concern about the Australian dollar’s influence on activity levels – a guaranteed threat to further gains.
For more information or to request a call back click here
| GBP/USD | 1.6473 |
| GBP/EUR | 1.1105 |
| EUR/USD | 1.4829 |
| GBP/JPY | 133.26 |
| GBP/AUD | 1.5174 |
| GBP/NZD | 2.0730 |
| GBP/ZAR | 10.9456 |
| GBP/CHF | 1.4206 |
| GBP/CAD | 1.5701 |
| GBP/SGD | 2.0239 |
| GBP/THB | 49.28 |
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