US Dollar:
The dollar took its cue from the recent rise in US stock markets yesterday as investors continued their appetite for more risk, leading the greenback lower. This may continue into today’s session as investors decide whether they carry on looking on the bright side and bet on a continuing global recovery. Thursday saw the Standard & Poor’s 500 rise to a 17 month high as the inverse relationship with the dollar played out. Over half a cent was lost against the euro to trade over the $1.37 level, and even against the unloved pound, a cent was lost to push cable up close to the $1.51 level. On Friday, investors will look out for the University of Michi-gan Consumer Sentiment measure. Demand for Long-dated Treasury’s also rose ahead of the Federal Open Market Committee’s rate policy meeting next week. The FOMC is widely expected to keep the main policy rate at near aero to sustain an economic recovery. But many market participants are worried that the central bank could tweak its language a bit to reflect the improvement in the economy.
Data 13.30: Core Retail Sales MoM 0.1% from 0.6%. Retail Sales MoM –0.1% from 0.5%.
Pound:
The UK pound is has continued its move higher against the dollar after gaining Thursday on a Bank of England inflation survey that pointed to slightly higher inflation over the next 12 months. We also saw cable rally on a move lower for the dollar on continued risk appetite in global markets. Before we get carried away on this move at the end of a pretty disastrous weak for Sterling, yet again another report on the pound’s future has dampened sentiment for sterling’s next move. A report in the Telegraph has stated UniCredit has alerted inves¬tors in a client note that Britain is at serious risk of a bond market and sterling debacle and faces even more intractable budget woes than Greece. The Italian-German group, Europe’s second largest bank, said Britain’s tax structure will make it hard to raise fresh revenue quickly enough to restore confidence in UK public finances. UniCredit’s fixed income director said “Britain's AAA-rating is highly at risk. The budget deficit is huge at 13pc of GDP and investors are not happy. The outgoing government is inactive due to the election. There will have to be absolute cuts in public salaries or pay, but nobody is talking about that. Sterling is going to fall further over coming months. I am not expecting a crash of the gilts market but we may see a further rise in spreads of 30 to 50 basis points. Today, FT house prices for Feb are due and the BoE’s Dale will speak in Cambridge at 11am. Data FT House Prices for Feb. Speakers: BoE’s Dale.
Euro:
The euro is edging higher against its major rivals as we close out the week, on the back of rising risk appetite and a falling dollar. But with concerns over sovereign debt lingering in the background, the euro is likely to enjoy only a brief reprieve. Investors were hesitant to take big positions ahead of Friday’s US retail sales data. The other story continuing to hover over the single currency is the growing unrest in Greece, which could complicate the government’s efforts to implement fiscal austerity measures, seen as crucial to a bid to improve its credit rating and ability to borrow money on the bind market.
Data 11.00: E/Zone Industrial Production MoM 0.7% from –1.7%.
General:
• Japanese prime Minister Yukip Hatoyama said Friday the government needs to take steps against the yen’s recent strength, which doesn’t reflect Japan’s weak economic and industrial conditions.
• The Swiss National Bank kept interest unchanged yesterday at 0.25% as expected.
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| GBP/USD | 1.5115 |
| GBP/EUR | 1.1019 |
| EUR/USD | 1.3720 |
| GBP/JPY | 136.84 |
| GBP/AUD | 1.6490 |
| GBP/NZD | 2.1559 |
| GBP/ZAR | 11.2045 |
| GBP/CHF | 1.6096 |
| GBP/CAD | 1.5478 |
| GBP/SGD | 2.1104 |
| GBP/THB | 48.94 |
| GBP/HKD | 11.7301 red-down; blue-up (snap shot |