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Speculation of emergency 50 basis point interest rate cut by ECB

Pound: The coming weeks look set to remain focused on the ongoing debt crises which has swamped Europe, focusing on Greece and how world leaders are going to sort out this mess. This has given the pound a bit of breathing space as investors are currently shunning the single currency for more safer assets, and sterling has now shifted sides to seem to be linked more closely to the safer haven currencies. It is by now means in the same camp as the dollar and yen, but maybe halfway between the safe haven group than the other major higher yielding currencies including the euro. We have seen one and a half cents gained over the weekend in GBP/EUR's favour after the pound over the 1.1550 level this morning. If the ECB surprise the markets with a potential emergency interest rate cut, then we may see GBP/EUR gain momentum. Friday's economic data from the UK also helped sterling after mortgage approval numbers from BBA came in better than expected, giv¬ing the pound a welcome boost. This probably helped the pound stem losses against the dollar after a three week low for cable was posted in Thursday at $15327. Cables slump has been mostly down to the run for cover in the wake of the world debt crises, which looks set to continue. For this reason, setting limit orders for cable, trading on the odd spike which will arise from time to time looks the way to go and a good trading strategy for VFX clients to proceed with future dollar purchases. These limit orders can be placed via on-line access, avail¬able straight away by applying for an on-line account. No Major Data Due Today. MPC Member Broadbent.


Euro: The euro slumped versus most of its major peers and may fall further should the German business confidence report due out this morning show that confidence in Europe's biggest economy fell to a 15-month low. The 17-nation currency was 0.1% from a decade low against the yen as Greece awaits a decision on its next round of rescue funding. We also await the Belgium bond sale due today as they worry about the euro areas debt woes are driving up costs. Its certain the debt crisis is causing an economic slowdown and that's the main reason for selling the euro, as investors point out they cant buy the euro because its economy is the weakest among the US, Europe and Japan. The single currency slid  1.5% versus the pound since Friday, levels not seen since 2001 against the yen at 102.22 and $1.3362 versus the dollar. The numbers keep getting bigger and bigger with regards to the potential rescue of Europe. When the EFSF was created in May last year it was un¬derwritten to the tune of €440bn. The plan that emerged over the weekend that include €2 trillion to be raised for the EFSF, as well as a 50pc default on Greece's€350bn of debt and for European banks that hold that debt, largely French and German, to be bailed out. Talks of a 50 basis point cut by the ECB have also been strongly denied, but an emergency rate cut by the ECB can't be ruled out. This will hang over the euro like a ball and chain, as a rate cut will only lead to the single currency giving up more ground against its peer's.
Data: 09.00: German Ifo Business Climate 107 from 108.7.


Dollar: The dollar has gained more than 3% over the past week, the biggest winner among the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The situation surrounding Europe's fiscal problems seems to be getting worse, and against this backdrop, investor risk aversion is likely to stay elevated and the dollar may see more strength in the short term. Overnight saw Asian equities under pressure with the Nikkei down 2%, marking the start of a new trading week where we left last week, in risk aversion territory.
Data 15.00: New Home Sales.


General: Gold continued to fall and the precious metal tumbled to trade at $1,563.00 per troy ounce.


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GBP/USD                        1.5476

GBP/EUR                        1.1510

EUR/USD                        1.3442

GBP/JPY                         118.11

GBP/AUD                        1.5924

GBP/NZD                         2.0031

GBP/ZAR                         12.5997

GBP/CHF                         1.4052

GBP/CAD                        1.5985

GBP/SGD                        2.0195

GBP/THB                         48.10

GBP/HKD                        12.0643

red-down; blue-up (snap shot)

These rates are for indication purposes only.


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