Pound: Sterling fell to its lowest in nearly three weeks against the dollar and also lost one percent against the euro on Tuesday, weighed down by concerns the Bank of England may issue a dovish assessment of the economy in its quarterly inflation report due today. Data yesterday showed an unexpected fall in UK manufacturing output, reminding investors of the fragility of the economy as it faces new challenges from global financial turmoil and widespread riots in London and other cities. The BoE releases its latest growth and inflation forecasts today and investors will be looking for clues on whether policymakers are edging closer to implementing further monetary easing to support the economic recovery. However, in the coming weeks sterling could be ‘well-placed’ for gains given the concerns about debt problems in the United States and its credit ratings downgrade , as well as the debt crisis in the euro zone.
Data 10.30: BOE Gov King Speaks, BOE Inflation Report
Euro: The European Central Bank reportedly bought Italian and Spanish government bonds for a third consecu¬tive day yesterday. Some estimates put the policy authority’s purchases through the session to 10 billion euros—a sizeable sum in volatile markets. In today’s session, we should watch the scheduled Italian bond auction as an updated litmus test for market confidence. The euro started yesterday’s session at 1.1507 against the sterling, strengthening to current levels of 1.1310. Similarly, the single currency has strengthened against the dollar, from 1.4200 earlier in the day to 1.4395 late last night.
No Major Data due today.
Dollar: The dollar rose against the majority of its major counterparts as the Federal Reserve’s pledge for record low interest rates failed to convince investors global growth will be sustained, boosting demand for haven currencies. Ben Bernanke faced the stiffest internal opposition a Federal Reserve chairman has confronted in nearly 20 years, highlighting his determination to do whatever he as essential to supporting a weak economy.
The Fed yesterday pledged to keep its benchmark interest rate at a record low at least through mid-2013 to revive a recovery that’s ’considerably slower’ than anticipated. The US central bank is ’prepared to employ’ additional tools to bolster an economy hobbled by weak hiring and anaemic household spending, it said in a statement.
No Major Data due today.
General:
• Canada’s dollar rose the most in more than a year versus its U.S. Counterpart after the Federal Reserve pledged to keep its benchmark interest rate at a record low.
• The Swiss Franc depreciated against the euro and the dollar after rising toward parity yesterday against the 17 nation currency as SNB intervenes.
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GBP/USD 1.6250
GBP/EUR 1.1310
EUR/USD 1.4370
GBP/JPY 124.65
GBP/AUD 1.5700
GBP/NZD 1.9450
GBP/ZAR 11.60
GBP/CHF 1.1780
GBP/CAD 1.5970
GBP/SGD 1.9880
GBP/THB 48.60
GBP/HKD 12.6880
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These rates are for indication purposes only.
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John Paul Georgiou
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