Posts Tagged ‘Monetary Policy’

For Britain – low interest rates and the weakening pound

Posted by admin on October 14th, 2009

With the advent of a more precise plan of the Conservative Party of Great Britain and slightly more predictable state of the economy of this country, it becomes possible to make assumptions about the future situation. Our latest economic forecast, which will be published later, reflects our average estimate compiled on the basis of stronger data and political development. In these circumstances, we expect the Conservative Party victory in the May elections with a substantial margin for the majority of seats in the cabinet. As a result, we see that monetary policy will receive a “powerful acceleration, while the fiscal experience a strong reversal.We expect to reduce state spending by 80 billion pounds, increasing revenues from indirect taxes by 20 billion pounds and “return to the development of” package valued at 3 billion pounds.

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Euro posts gains against the US dollar as risk appetite ushers investors into high-yielding currencies

Posted by admin on October 13th, 2009

The single currency recovered some of the losses it incurred on Friday, gaining over half a cent against the greenback as risk appetite in the market strengthened.Rallying equities yesterday, which have been boosted by stronger commodity prices and optimism about the US corporate earnings season, also buoyed support for the euro, allowing it to briefly trade over 1.48. Analysts also noted that while in other nations future policy remains hazy, the single currency benefited from a clearer outlook for monetary policy in the eurozone. Additionally, comments from the president of the St Louis Federal Reserve that the US economy faced risks from rising inflation, stoked speculation that US interest rates might rise sooner than had been expected, but investors remained bold in their exposure to risk, continuing to sell the dollar.

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Sterling slides further in the wake of a damning UK economic report

Posted by admin on October 13th, 2009

The pound maintained its downward trend yesterday, losing a further 0.6% as a British report cast doubts over UK recovery prospects. The outlook for global monetary policy shaped action on the foreign exchange markets on Monday, with sterling the main casualty. A report from the Centre for Economics and Business Research predicted that UK interest rates would remain at their historic low of 0.5% through 2010. The report also forecast they would stay below 2% until 2014. That would be likely to leave sterling the lowest-yielding major currency at a time when interest rates outside the UK look set to start rising, which added selling pressure to the fragile pound.

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Demand for the kiwi remained strong yesterday, but it has lost ground in the wake of comments from Ben Bernanke

Posted by admin on October 9th, 2009

The pound edged down against the kiwi as rising risk appetite in the market offset the BoE’s decision to hold their monetary policy unchanged. Investors continued to buy into the higher-yielding New Zealand dollar, encouraged by rallying global equity markets and a broadly weaker dollar.In the UK, the BoE kept interest rates at 0.5% and decided against extending the quantitative easing programme as some had feared.However, the decision only gave the pound a muted boost against the kiwi, as investors had already priced the news into the market.In trading this morning, the kiwi has trimmed its gains as investors lock in some profits and as comments from the Fed Chairman suggested that the US may need to tighten monetary policy, spurring a slight return to the US dollar.However analysts have noted that overall market sentiment towards the kiwi is still pretty bullish, and that any upward movement for the pound is likely to be as a result of profit taking, rather than decreasing demand for kiwi assets.

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The aussie continues to trade strongly, supported by risk appetite in the market

Posted by admin on October 9th, 2009

The aussie climbed a further two cents yesterday as figures revealed rising employment in Australia, and as rising risk appetite supported strong demand for high yielding currencies. The Australian dollar continued to push higher as encouraging data from the labour market gave investors further cause to buy into Australian assets. The recent rate hike to 3.25% has increased the yield gap between the two currencies, and the recent downturn in unemployment has simply reinforced the sentiment that Australia is at the forefront of the global economic recovery, strengthening aussie demand.

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Euro advanced against the greenback, buoyed by a relatively upbeat ECB rate statement

Posted by admin on October 9th, 2009

The single currency climbed to a two week high of 1.4815 yesterday as investors continued to sell the dollar to fund riskier trades. The single currency returned to its recent upward trend, initially climbing half a percent, as investors took up dollar selling in the wake of further evidence of global economic recovery. Australian employment data revealed a rise in jobs in September, reinforcing risk appetite and triggering broad dollar selling as its haven appeal weakened. The single currency held its gains in the afternoon after the European Central Bank left interest rates unchanged at a record low 1.0%, as the market expected.

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Pound advanced vs a weakened dollar yesterday, supported too by a hold in the UK’s QE programme

Posted by admin on October 9th, 2009

The pound climbed just over a cent (0.6%) against the dollar, buoyed by the BoE’s decision to keep its assets purchase scheme on hold.In early trading sterling moved up against a broadly weak dollar, supported by expectations that the BoE would keep interest rates unchanged and maintain its current level of quantitative easing. The dollar also came under pressure, falling broadly as rising equity markets fuelled demand for riskier assets at the expense of the safe haven US currency. Dollar selling was led by positive employment data in Australia, which spurred investors to relinquish positions in the greenback in favour of higher-yield currencies, favouring an upward movement in the sterling/dollar pair.

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Sterling continued to slide vs the euro on the run up to the weekend, but has capped its losses this morning

Posted by admin on September 28th, 2009

Sterling fell yet further on Friday on perceptions that the UK currency would be allowed to weaken to help the fragile British economy. The pound dropped to a fresh five-month low against the euro on Friday as traders continued to sell sterling following comments from Mervyn King that sterling’s fall was helpful in rebalancing the UK economy. Some analysts have suggested that these comments which have undermined the UK currency, have become a new policy tool with which the central bank can kick-start the economy. Pressure on the pound was also stemming from the UK’s budget deficit and continued speculation that the BoE might yet loosen monetary policy further.

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Positive economic data from NZ, keeps the kiwi rallying higher vs sterling

Posted by admin on September 25th, 2009

The New Zealand dollar advanced for the third consecutive day yesterday, as demand for kiwi assets remained high and as sterling weakness becomes ever more apparent. The kiwi gained another two and half cents (1.1%) yesterday after the BoE announced that it was perfectly content with a lower currency exchange rate and was unlikely to initiate any type of tightening into its monetary policy for the foreseeable future.The kiwi also continued to be supported by positive economic data from New Zealand, which supported claims that the RBNZ is considering raising interest rates.The New Zealand currency has found support today after the G20 did not indicate any imminent withdrawal of stimulus measures, triggering a rush back into higher-yielding assets.Initially the kiwi lost ground following disappointing local trade data released late last night, but it has rebounded strongly, climbing 0.75% in trading so far today.

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Positive data from NZ keeps the kiwi advancing against the pound

Posted by admin on September 24th, 2009

Following positive news in New Zealand, the kiwi climbed strongly yesterday but had its gains steadily pulled back after the release of the MPC minutes. It was revealed early yesterday morning that New Zealand had officially exited recession posting a third quarter positive GDP figure of 0.1%, which pulled the price to a low of 2.2433.The report raised expectations that the Reserve Bank of New Zealand would move to tighten monetary policy sooner than previously forecast.However, the kiwi had most of its gains steadily eroded throughout the day’s trading after the minutes from the latest UK MPC meeting revealed no discussion over reducing current interest rates, with the pair closing at 2.2696.In trading this morning, the kiwi has advanced further, currently trading up nearly a percent, as fresh data from New Zealand showed that domestic consumer confidence jumped to a four-year high in the third quarter.

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British Pound Selling Continues With Unemployment to Set 12-Year High (Euro Open)

Posted by admin on September 16th, 2009

The British Pound fell against the US Dollar in overnight trading ahead of a report that is set to show the unemployment rate hit a 12-year high of 5% in August. The Euro Zone Consumer Price Index and Swiss Retail Sales are also on tap.Key Overnight Developments• Australia Won’t Raise Interest Rates Until Next Year, Says Westpac• Euro Flat, British Pound Lower Against USD in Overnight TradingCritical LevelsThe Euro consolidated in a narrow range below the US session high at 1.4686 in overnight trading. The British Pound moved lower, slipping as much as -0.4% against the US Dollar.Asia Session HighlightsAustralia’s Westpac Leading Index added 1.1% in July, rising to the highest level in seven months.

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