Skip to content

Fed action of twist fails to lift global market

Pound The pound move wasn’t exactly a surprise to the markets yesterday as speculation before the BoE minutes were released that QE may be on the way, had already dragged sterling down. The minutes basically backed that view up even though they showed only one Bank of England Monetary Policy member Adam Posen voted to extend quantitative easing at the MPC’s September meeting, but most of the no policy change camp said the decision was finely balanced and the case for more QE had STRENGTHENED. While the vote was unchanged from August, the minutes leave the door wide open to more QE, with some MPC members saying if the events of the past few months were repeated this could justify further QE. Result: sell sterling was the call as we saw the pound slide versus the euro despite the single currencies own ongoing issues. Versus the dollar we saw cable continue to leak further losses, which was then extended after the Fed move later in the day. Other data which did not help the UK currency were the borrowing figures, which came in above analysts expectations at £15.9bn, although earlier borrowing figures were revised down. The August figure marked a rise of £1.9bn from a year earlier and was the highest total for August on record.  Data 11.00: CBI Industrial Order Expectations  expected –5 from 1.


Euro: Yesterday may have felt like a holiday for the euro as outside influences gave the single currency a rest-bite as the dollar gave up some ground and sterling saw heavy selling pressure after the release of the BoE minutes. The euro managed to hit a two week high in EUR/GBP which was also helped by Greece saying it will accelerate budget cuts to keep emergency loans flowing. Austerity measures in Greece included a 20% cut in pensions of more than €1,200 a month and lower wages for 30,000 state employees. The euros move against the dollar did come to a grinding halt though late in the trading day after the Fed move saw risk virtually disappear, sending the euro down versus its US counterpart as we saw EUR/USD tumble through the $1.36 handle.   
Data 09.00: E/Zone Flash Manufacturing.


Dollar: Following on from the Fed’s announcement of ‘operation twist’ and the downbeat outlook for the US economy, which saw risk aversion swamp the market with US stocks finishing with significant losses and the buying of the long end treasury’s, the greenback just sat back and smiled as funds flowed into the risk averse ‘Currency King’ of the moment. The Fed’s dramatic step Wednesday to help revive the economy, resuming its unconventional efforts at stimulating growth nearly a year after embarking on an initiative that ultimately failed to deliver a healthy recovery. The so called ‘operation twist’ (the Fed’s aim to lower interest rates on long term loans such as mortgages to you and me) was made instead of another round of QE. The announcement that the Fed would buy $400bn in long term Treasury bonds immediately achieved its intended effect, pushing rates on these securities and other investments to their lowest level in decades. They succeeded at getting lower long term interest rates, which was great, but the confidence they wanted to encourage didn't seem to come though. This saw the dollar continue to push higher against its peers as funds flowed into the safe haven currency. Moody’s downgrade of three large US banks, Bank of America, Citigroup and Wells Fargo didn’t exactly help the market mode and risk averse investors either. Data 13.30: Unemployment Claims 419k from 428k.


• New Zealand’s currency slid for a fourth day against the greenback after the government statistics agency said gross domestic product expanded 0.1% in Q2 from the previous quarter. A flight to safety also hurt the Kiwi currency.


For more information or to request a call back click here


GBP/USD                        1.5475

GBP/EUR                        1.1429

EUR/USD                        1.3536

GBP/JPY                         118.40

GBP/AUD                        1.5513

GBP/NZD                         1.9506

GBP/ZAR                         12.609

GBP/CHF                         1.4028

GBP/CAD                        1.5734

GBP/SGD                        1.9961

GBP/THB                         47.45

GBP/HKD                        12.059

red-down; blue-up (snap shot)

These rates are for indication purposes only.


+44 (0) 20 7959 6917
For more information: