US Dollar:
The dollar continued its rise against the majors yesterday as global equity markets dropped after Germany banned short-selling of European public debt. These bans from Germany really spooked the market sending the Dow Jones down over 1%, S + P down 1.42% and Asian stocks following suit this morning. The drop in US stocks came as the euro fell to a four year low against the mighty greenback on continued concerns over whether the bailout plan announced last week will be enough to contain sovereign debt woes in the euro¬zone. Some companies exporting to Europe could see hits to their profitability from currency conversions as the dollar continues to strengthen against the euro, which is having a knock on effect on the value of cable as the pound also declines on the dollar. Once again a single eurozone country has enforced a unilateral measure in an uncoordinated fashion. It is unclear whether other eurozone countries will follow Germany’s actions but it is clear that the measure has led to a further bailout from European asset markets and making traders play a more risk averse game, all leading to a move back into the dollar. Data 13.30: CPI M/M expected 0.2% from 0.1%, Core CPI M/M 0.1% from 0.0%. 15.00: Mortgage Delinquencies 19.00: FOMC Meeting Minutes.
Pound:
Sterling continued to lose ground on the dollar and yen yesterday with investors fretting over sovereign debt issues and Germany's moves against speculation. The pound was hurt by lingering concern over the UK’s own fiscal and economic problems, with cable dropping to $1.4238, its lowest since March 30, 2009. Some mar¬ket speculation holds that sterling could revisit its January 2009 low of $1.35 this summer as the dollar contin¬ues to benefit from risk averse moves in the market. The pounds position against the euro has been slightly different in that the single currency has been battered more than the UK currency. We have now seen the pound hit a week high of 1.1770 on continued selling pressure on the euro after Germany's short selling ban announcement yesterday. Yesterday’s inflation data from the UK came out much higher than expected at 3.7%, but has been slightly downplayed due to much more pressing matters such as the UK’s mounting debt levels. Analysts now look for CPI to remain over 3% year on year until Dec 2010, implying that the Governor of the BoE will need to write two more letters this year to explain why inflation is so high. The MPC minutes due today may have more insight for investors. Data 09.30: MPC Meeting Minutes expected at 0-0-9.
Euro:
The euro hit a new low against the dollar yesterday after Germany announced a surprise ban on naked short selling and a new tax on banks, fuelling fears that European leaders were mismanaging their sovereign debt crises. The euro, which had already hit a four-year low against the dollar on Monday, slid even further to $1.2148, its lowest level against the greenback since April 17th 2006, after Germany instituted a ban from mid¬night last night on the naked short sale of shares in the country’s top financial institutions and the bonds of euro¬zone countries. Naked shorts– when the person selling the assets does not borrow it in advance—has been blamed for exacerbating stock market plunges. The single currencies woes have also seen it give up recent gains made against the pound, hitting a week low to trade just under the 0.85 level. Speakers: Buba Trichet.
General:
• Oil prices tumbled to a new low for the year Wednesday on a stronger dollar and persistent concerns over the euro¬zone debt crises, with the black gold hitting $67.90 a barrel before recovering to $68.64.
• Gold’s rebound from Tuesday’s intraday low of 41,207 a troy ounce comes on the back of German governments deci¬sion to ban naked short selling of shares in 10 German banks and in certain eurozone debt and CDS. To trade at $1,212.20.
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| GBP/USD | 1.4345 |
| GBP/EUR | 1.1748 |
| EUR/USD | 1.2215 |
| GBP/JPY | 132.04 |
| GBP/AUD | 1.6719 |
| GBP/NZD | 2.0825 |
| GBP/ZAR | 10.9720 |
| GBP/CHF | 1.6457 |
| GBP/CAD | 1.4939 |
| GBP/SGD | 2.0032 |
| GBP/THB | 46.32 |
| GBP/HKD | 11.1867 red-down; blue-up (snap shot) |
These rates are for indication purposes
For more information or to get the latest spot rates contact:
John Paul Georgiou
Senior Foreign Exchange Broker