US Dollar:
We have now seen the dollar post losses against both the euro and pound for the last two trading days of the week as risk sentiment continued in global markets. The greenback lost its sparkle on Wednesday as it re-versed gains made on the single currency, now giving up over nearly four and a half cents since its week high of $1.2873. EUR/USD has now hit $1.3450 in the favour of the euro. Against sterling we also saw big losses for the buck as cable rallied to trade over the $1.5850 mark. The dollar has now posted a four week low against the pound.
Data 13.30: Core CPI m/m expected 0.1% unchanged
Pound:
The pound is closing out the week mixed as we see strong gains for cable but a steep decline against the single currency. Risk sentiment continued into the last trading day of the week with equities keeping hold of recent gains. The dollar was sold off on the back of this move which has given sterling a welcome boost, pushing GBP/ USD up by one and a half cents to hit $1.5880 last night. The pounds position against the euro is stark in con¬trast as losses of nearly two percent in the last 24 hours. Yesterday we were trading over the 1.20 handle but this morning we are now seeing rates around the 1.1770 levels. A strong demand for European bonds in certain peripheral European countries gave the euro a boost, coupled with bullish comments from the ECB regarding potential interest rates moves. In contrast, the BoE kept interest rates on hold and any hints of a rise close to their chest as rates remained at 0.5%.
Data 09.30: PPI Input m/m expected at 1.6% from 0.9%.
Euro:
The euro is closing out the week on a positive note and posting strong gains against both the euro and dollar. A bullish demand for Portuguese bonds on Wednesday and Spanish bonds on Thursday gave the single currency a boost, coupled with the European Central bank keeping interest rates on hold saw all led to investors buying into the euro. There was also hawkish signals from the ECB’s President ’Jean-Claude Trichet’ as he stated there was evidence of short term upward pressures on prices. The move marked a turning point in attitudes at the bank from a neutral stance to leaning towards more tightening, although it left interest rates still at a record low of 1%. Just when everyone thought that Mr Trichet would spend little time discussing monetary policy, he proceeds to drop a rate bombshell. Bullish comments on any talk of rate hiking is seen as a positive for that currency and we have now seen three and a half cents gained over the dollar and two percent on sterling.
No major data.
General:
• US, Germany, Britain and France still merit the top AAA credit rating but must fight high debt levels to maintain this according to Moody’s investor services.
• The Aussie dollar has continued to post losses across the board as GBP/AUD has now hit a four week high of AUD$1.5915 n the pounds favour.