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Markets show lack of confidence in sterling as the pound plunges

US Dollar:
The dollar has seen a mixed start to the day as the market digests news of a bailout for Greece, helping to lift the euro against its US counterpart, but a lack of confidence in the pound has seen the greenback rally on ster¬ling.  The dollar hit a nine month high against the pound to trade below the $1.51 level as a lack of confidence in the current UK government hits the value of its currency. Against the euro however, we did see a slight reversal in the dollars value as EUR/USD went over a cent in the single currencies favour to hit $1.3622. This came after news hit the wires of a potential bail out by Germany and France. This week will focus on interest rate changes in the eurozone and Friday’s US February jobs report, expected to show a drop of 75k jobs, compared with a 20k loss in January, with the unemployment rate rising to 9.8% from January's 9.7%.
Data 13.30: Personal Income & Spending. 15.00: ISM Manufacturing and Construction Spending.             
The markets showed sterling exactly what they thought about another 5 years of a Labour government as the prospect of a hung parliament loomed closer and confidence in the UK currency evaporated. Despite better than expected UK GDP Q4 data last week, the polls showed the Conservatives lead over labour was slip¬ping, now down to 2%, bringing closer the prospect of a hung parliament.. The view that labour would not cut its debt levels quicker, or as drastic as needed has been one of the key drivers of sterlings downward trend. There is also a view that as the recent UK data has been better than expected, the prospect of snap election is also on the cards. If the election shows no overall majority in its results, the prospect of uncertainty could take its toll on both the London index and also the value of the pound. The prospect of more QE from the Bank of England is also weighing heavily on sterling, but the view seems to be it may not come this month. The Bank of England is likely to leave its main interest rate unchanged at a record low of 0.5% and is unlikely to announce an extension of its quantitative easing stimulus beyond the £200bn it has already pumped into the economy.      
Data 09.30: Mortgage Approvals, Net Consumer Credit and PMI Manufacturing.     

This week see’s the euro show signs of a recovery against the majors in the currency markets as news circulates of a potential bailout for Greece by the powerhouses of Europe in the form of Germany and France. These rumours have seen the single currency take back over a cent against the dollar, and extend its gains against an under-fire pound, as the UK currency grapples with its own financial demons. The euro has now taken  one and a half percent off its UK cousin to reach 0.8980, and with the pound under pressure with the up and coming election, the euro may benefit further if the Eurozone manages to show a clear path for how to deal with the Greek debt issues. But this is an ongoing story so its sure to be ever evolving. According to the Greek press, French Bank Caisse de Depot will join German’s government-owned development bank, KfW in buying Greece’s bonds as the Greek government makes further budget cuts. This has already been denied by German Chancellor Angela Merkel, but a visit to Germany at the end of the week by the main players from Greece may see more clarity. Data 10.00: E/Zone Unemployment Rate 10.1% from 10.0%.              

•  The Aussie dollar has continued its surge in the currency markets and looks set to continue as the Aus¬sie currency hits multi-year highs against an under pressure pound, breaking under the AUS$1.69 level.
• JP Morgan warns American investors Californian debt levels are a greater risk then those of Greece.


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GBP/USD 1.5155
GBP/EUR 1.1120
EUR/USD 1.3630
GBP/JPY 135.53
GBP/AUD 1.6880
GBP/NZD 2.1720
GBP/ZAR 11.6410
GBP/CHF 1.6291
GBP/CAD 1.5960
GBP/SGD 2.1305
GBP/THB 49.78
GBP/HKD 11.7710 red-down; blue-up (snap shot)


These rates are for indication purposes only.

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