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Euro sees recovery on dollar—rescue package for Greece looms

US Dollar:

Market sentiment improved yesterday, helped by firmer data and expectations that Greece’s woes are on the path to being resolved. This saw the dollar give up some of its recent gains against the majors, but that was not before the greenback hit multi-month highs against both the pound and euro. As announcements on the developments in Greece and the release of key US labor market data draw closer, investors are under-standably prudent as bad news could emerge on both fronts. Some profit taking ahead of these may have been locked away. US officials have tried to prepare markets for poor jobs numbers because of the winter effect. The Fed’s Kocherlakota said unemployment levels are uncomfortable and could be above 8% in 2011. He also stated the economy will recover slower than many had hoped. More downbeat comments were heard from the Fed’s Fisher, sating the economy is not robust but improving. Data 13.15: ADP Employment Change –10k from –22k. 15.00: ISM Non-Manufacturing Composite 51.0 from 50.5. 19.00: Fed Releases Beige Book.

Pound:

Sterling is getting what's likely to be a fleeting boost after recent polls indicated a stalemate in UK par-liament is less likely than had been thought earlier this week. A hung parliament after the next election could lead to political gridlock and put additional pressures on an already stressed economy. In data news, sterling was also helped by consumer confidence hitting its highest level for two years in February, buoyed by confirma¬tion that the economy is finally emerging from its longest recession on record, the Nationwide Building Society said Wednesday. However, market sentiment seems to be the key driver of the major currencies right now, so sterling will continue to be under pressure from all angles for the short term. Cable managed to claw back two cents from $1.4854 to over the $1.50 level, although we have seen a move down again in early morning trade. The rot was also stopped against the euro, however, with a potential bail out package possibly on the cards for Greece, GBP/EUR remains under huge pressure and we may see the pound wobble again should a package be announced. Data 09.30: PMI Services expected 55.0 from 54.5.

Euro:

The euro continues its recovery against the dollar today but technicians reckon it will peter out at $1.38 and then resume its prior downtrend. The common currency could see additional support Wednesday should debt-pressured Greece introduce new austerity measures that convince the European Union and big eurozone countries such as German as well as markets that it can get its fiscal house in order. The euro is finding some stability over the last week or so, and the prospect of aid for Greece has helped reduce the immediate contagion fear across the euro area periphery. The question the market needs to grapple with is: Are the sovereign risk concerns going to bring down overall risk appetite, or just damage the European currencies. The Greek govern¬ment is expected to outline on Wednesday a new austerity package of around €4bn in an effort to cut its huge budget deficit by 4% this year. The ECB which meets Thursday, has room to keep interest rates low to support the region’s nascent economic recovery. This expectation gained support from Tuesday’s annual inflation report for the 16 countries that share the euro, showing it dipped to 0.9% in February. The ECB may also want to avoid upsetting markets with any signal toward tightening at this time. Data 10.00 : E/Zone Retail Sales.


General:

• A report in the N.Y. Times has shown that global fears over the UK’s debt issue is grabbing global headlines, with investors asking if Britain may soon face its own sovereign debt crises if the government fails to slash its growing budget deficits quickly enough to escape the contagious fears of financial markets.

• Bank of Canada leaves interest rates unchanged at 0.25%.

GBP/USD 1.5005
GBP/EUR 1.1028
EUR/USD 1.3615
GBP/JPY 133.34
GBP/AUD 1.6642
GBP/NZD 2.1660
GBP/ZAR 11.4091
GBP/CHF 1.6140
GBP/CAD 1.5546
GBP/SGD 2.1045
GBP/THB 49.05
GBP/HKD 11.6536 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 6851

john.georgiou@voltrexfx.com

 

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