Forex News » Uk Economy

Sales data took the pound higher against the kiwi, continues to climb in trading this morning

admin — Wed, 28 Oct 2009 09:08:00 +0000

Sales data took the pound higher against the kiwi, continues to climb in trading this morning is a post from: Forex News

The pound made up further ground on the kiwi dollar, gaining 0.65% after positive sales data supported evidence that the UK economy is still on the road to recovery.

The sales data, which came in above market forecasts, encouraged investors to buy back into the UK currency, with the price briefly reaching above 2.20.
Conversely, selling pressure remained on the New Zealand dollar after the nation’s Prime Minister expressed concern over the currency’s strength, and stated that there were few tools with which to deal with it.
Higher-yielding currencies were also under pressure overnight as Asian equities turned negative, with Nikkei 225 losing over a percent, dulling demand for “riskier” assets.
In trading this morning the pound has continued to rally, rising to a three-week high over 2.22 as a New Zealand business confidence survey unexpectedly undershot forecasts, weakening the possibility of a hawkish RBNZ rate statement to be made this evening at 20:00.

The pound continues its rally against a broadly weaker aussie

admin — Wed, 28 Oct 2009 09:07:00 +0000

The pound continues its rally against a broadly weaker aussie is a post from: Forex News

Sterling edged up against the aussie yesterday, benefiting from improved UK sales data, which supported claims that the UK economy is recovering.

On Monday evening, MPC member Adam Posen, following negative GDP data, stated that there were still signs of an economic recovery even if Britain is behind other countries in pulling out of the recession.
His statement found support yesterday after the UK CBI sales showed month-on-month improvement, beating market expectations and buoying demand for the UK currency.
The UK currency has pushed higher in trading this morning after investors pared bets of a steep rate rise in Australia after inflation data did not increase by as much as some had anticipated.
The quarterly CPI figure came in at 1.0%, which tilted the markets away from pricing in a more aggressive upward rate movement at the next RBA meeting on Nov 3 rd.
Currently the pair are trading around the 1.80 level, just below a three-week high for the pound.

Euro is more expensive than a pound before the end of the year

admin — Tue, 27 Oct 2009 17:38:00 +0000

Euro is more expensive than a pound before the end of the year is a post from: Forex News

Today, one of six bank Moors BNP Paribas said that in 2009 the pound sterling could fall to parity with the euro. Today, steam EUR / GBP is trading at around 0.9070, up from 0.84 in mid-June. The jump came when it became clear that the Bank of England will continue to build a program to repurchase the assets, despite the improvement in the global financial sector. What happens to the pound and the UK economy is studying financial analyst FxPro Alexander Kuptsikevich.

In Russia, considered to be the beginning of the crisis in September last year. But in fact the developed world crisis began one year earlier. In September 2007, in the UK because of losses on U.S. sub-prime mortgage securities, was taken to balance the state a major bank Northern Rock. Since it became abundantly clear that the credit crisis in the U.S., will lead to worse consequences in the UK. As a result – the tightening of credit in the country, and the collapse of property prices, which partly helped to mitigate the monetary policy.

The year before the bankruptcy of U.S. giant Lehman pound has lost 15% against the euro (EUR / GBP rose from 0.6730 to 0.7750). After loud bankruptcy and rapid deterioration in the economy pound has fallen in price to a single currency by 26% (to 0.98) to the beginning of the year. As repeatedly noted by the representatives of the Bank of England, is weakening played a positive role in the economy, supporting industry and services, and leaving a positive inflation in the country. After Armageddon in the minds of market players is over, sterling has been gradually restoring its position. He became a kind of mirror for the financial sector. Pound bought on positive news from the banks and sold on the negative.

At the moment if we compare the euro area (not scratchy EU) and Britain, the latter certainly looks worse. GDP fell in the UK for the year to 5,5% for the second quarter and 4,5% in the euro zone. In the third quarter of Britain’s economy is once again demonstrating the decline in the euro area reasonably expect positive growth rates.

Such a sad situation for Albion reinforced expectations of quantitative easing monetary policy already at a future meeting of the Bank of England (5 November). Perhaps such assumptions and BNP Paribas was forced to revise the forecast for the pound to parity this year, but not in the first quarter of next.

Nevertheless, the weakening of the pound is very effective method of recovery. Bank of England has “published” a huge amount of 175 billion pounds. While the financial system remains “frostbitten”, and injections are not fully reflected in the dynamics of the market, but in the next few quarters it will definitely happen. As a result, the pound, we will probably see the same picture as the U.S. dollar: for a healthy economy and to reduce the debt burden will be useful to drop the course, and it is unlikely that officials will be hindered.

Sterling fell back significantly against the dollar on Friday, as GDP figure disappoints the market

admin — Mon, 26 Oct 2009 09:11:00 +0000

Sterling fell back significantly against the dollar on Friday, as GDP figure disappoints the market is a post from: Forex News

Sterling lost three cents (1.9%) to the dollar, as a weak UK quarterly GDP figure abruptly halted the pound’s recent rally.

The greenback gained the most daily value against the pound in a month as the UK’s economy unexpectedly contracted in the third quarter, giving the Bank of England more reason to expand emergency measures to spur growth.
It is the first time UK gross domestic product has contracted for six consecutive quarters, since quarterly figures were first recorded in 1955.
The pound fell more than a cent against the US dollar following the release of the figures, losing 0.6% in two minutes, with traders particularly concerned that the UK may turn out to be the only major economy still in recession.
The unexpected decline in the services sector was the key factor behind the drop. The UK economy’s reliance on the service sector, and financial services in particular, may be the reason why it is still in recession when partners such as France and Germany exited earlier in the year.
This suggests that the likelihood of an expansion in quantitative easing by £50bn or so over the next quarter is rising, which will put further pressure on the pound.

UK economy contracted by 0.4%, which has and will continue to weigh heavily on sterling

admin — Mon, 26 Oct 2009 09:03:00 +0000

UK economy contracted by 0.4%, which has and will continue to weigh heavily on sterling is a post from: Forex News

In an uncertain day for the UK economy, the pound lost as much as 2.0% to the euro on Friday, sharply reversing its recent rally to close down at 1.0862.

Data revealed that the UK economy unexpectedly contracted by 0.4% between July and September this year, confirming that the UK is still in recession.
Quarterly growth of 0.2% had been expected, although expectations had been tempered by recent figures showing no growth in retail sales in September and a 2.5% decline in industrial output in August.
Importantly, the disappointing GDP figures may now lead the Bank of England to consider the possibility of extending their asset purchase scheme in their November meeting in order to sustain the evidently fragile recovery.
Recent comments from policymakers had led markets to believe that the UK would be tightening monetary policies, however the tone is likely to be quite different following Friday’s GDP figure.
In trading this morning, the pound remains under pressure with investors continuing to sell the UK currency following last week’s disappointing data.

UK GDP contracts by 0.4% – pound dives

admin — Fri, 23 Oct 2009 09:01:00 +0000

UK GDP contracts by 0.4% – pound dives is a post from: Forex News

Data this morning has run significantly against market expectations, confirming that Britain is still in a recession. The UK’s third quarter GDP figure was revealed to be a 0.4% contraction, which now means that the UK has suffered 6 consecutive quarters of negative growth. Market participants had speculated that the UK economy would grow by 0.2% in the months from July to September and had taken the pound slightly higher this morning.

There has been data recently though that points to this disappointing figure. Data in early Ocotber revealed that manufacturing production had fallen by 1.9%, significantly below forecast and this has clearly weighed heavily on overall output. In addition, yesterday’s UK retail sales figures, showed that there was no growth in High Street activity in September, which was a further warning that the economy may not yet be expanding.

Investors will now be looking ahead to the Bank of England’s next policy meeting on the 5th November, where the members will have to seriously consider the possibility of extending their asset purchase scheme. Recently, we have seen G20 countries preparing to make steps to remove monetary stimulus measures as the global recovery strengthens, however the BoE still clearly has a long way to go before such steps can be taken. Even dovish market participants were not expecting Britain’s economy to have contracted by as much as 0.4%, a figure that truly underlines the fragility of the recovery.

As the news was reported, the pound dropped a full percent against both the euro and the dollar, as investors hurried to sell their sterling. Looking to the short and even medium term, the UK currency will remain under heavy selling pressure, with confidence in the economy shot. That we are still in a recession and with the possibility of further QE now back on the horizon, investors will see little hope of an interest rate rise in Britain even into 2010, which will heavily on the value of sterling.

The kiwi edged higher against the pound but has weakened this morning following important Chinese data

admin — Thu, 22 Oct 2009 08:28:00 +0000

The kiwi edged higher against the pound but has weakened this morning following important Chinese data is a post from: Forex News

Having given up ground to the UK currency in early trading, the kiwi rallied steadily through the afternoon, to close marginally up at 2.1833.

The pound found support yesterday after the BoE’s policy minutes revealed no direct discussion over further loosening the current monetary policy.
In the wake of the news, sterling posted an intra-day high of 2.2074 as investors grew more confident in the outlook for the UK economy.
However, the New Zealand dollar capped its losses as Alan Bollard, governor of the Reserve Bank of New Zealand, in a speech appeared surprisingly reserved over the recent appreciation of the kiwi dollar.
Mr Bollard said that kiwi strength was “not necessarily an obstacle to raising the cash rate,” encouraging investment in the higher-yield currency.
In trading this morning, the New Zealand dollar has weakened, enabling the pound to advance back towards 2.20, as Chinese data failed to do more than meet market forecasts, giving traders a reason to cash profits.

Pound continued to climb against the aussie yesterday as confidence in the UK economy improved

admin — Thu, 22 Oct 2009 08:26:00 +0000

Pound continued to climb against the aussie yesterday as confidence in the UK economy improved is a post from: Forex News

A broadly stronger pound hit a two-week high against the aussie, briefly rising over 1.8000, as confidence in the UK economy gained momentum.

Sterling jumped following the minutes from the Bank of England’s latest policy meeting, which dampened expectations of an extension to quantitative easing.
The minutes appeared to move the balance of market expectations to the possibility of a pause of the government’s asset purchase scheme in November, reversing recent speculation.
In addition, the aussie dollar found its strength undermined as commodity prices, most notably oil, turned lower, discouraging investors from the higher-yielding currency.
In trading this morning the pound has continued to advance, reaching back over 1.80, as investors cut long positions in the “riskier” currency after Chinese data dashed expectations of some who were betting on a positive surprise.
The most significant figure, the Chinese 3rd quarter GDP, revealed a growth rate of 8.9%, bang in line with expectations, however there had been hopes of over 9.0%.

Sterling made substantial ground on the dollar yesterday as the BoE showed no sign of loosening montary policy further

admin — Thu, 22 Oct 2009 08:19:00 +0000

Sterling made substantial ground on the dollar yesterday as the BoE showed no sign of loosening montary policy further is a post from: Forex News

Dollar selling in the market was stepped up with investors moving into the pound as the MPC minutes proved more positive than expected.

The pound climbed over 1.66, posting a two and half cent gain against the dollar as the minutes from the Bank of England’s October monetary policy meeting struck a less dovish tone than recent comments suggested.
Analysts said the most important story within the release was the fact that in the September meeting, governor Mervyn King thought an expansion of the central bank’s quantitative easing programme could be justified. But there was no mention of that in this latest meeting.
Additionally, the pound was given further support after Mr King said in an opinion piece in Scotland’s Herald newspaper that, “it would be wise to take account” of the prospect of higher interest rates, heightening confidence in the UK economy.
The dollar is up slightly in morning trading as a raft of Chinese data, though positive, failed to offer any major surprises, gaining in line with market expectations.

A sterling crash is a godsend

admin — Wed, 21 Oct 2009 07:51:00 +0000

A sterling crash is a godsend is a post from: Forex News

Britain twice averted disaster over the past century, in a timely manner, if I may say so – he brought down the pound sterling. In both cases there was no apparent confidence that this recovery in the economy will last more than 10 years.

Commentators have told us in 1992 that exit from the European exchange rate mechanism will cause inflation. They underestimated the stagnation in the UK economy and the collapse of money supply M3. Cheap Asian exports, in any case, started to influence global commodity prices.

Thanks to him, made possible the low rate of inflation for 14 years, which was the longest period of uninterrupted growth in British history. The last stage has already been forged, driven by 120% increase in mortgage and tax thrust Gordon Brown for the loss of 5% of GDP, the cyclically adjusted. But the first decade, was indeed successful.

Error ERM (European exchange rate mechanism) was that it was not the exchange rate as such. What really mattered – so this limitation in monetary policy. It has forced us to import the German interest rates set for the suppression of the boom, while England faced a sharp decline in the real estate sector.

With today’s events it has nothing in common, though, and should look at the forced departure of Britain from the “gold standard” in September 1931. That event was catastrophic, gold was the anchor currency of the Empire era.

Failure to reduce costs has led to the final denouement. Labor government had collapsed. Navy refused to set sail to protest against the reduction of pay. These events reported with headlines such as “rebellion. The Bolsheviks were singing “red flag” around campfires. Those who read the newspapers in New York, Berlin and Paris thought that the British Empire collapsed.

Keynes triumphed as the “giggling boy, who had just detonated fireworks under the feet of someone who is not fond of” – wrote Skildelsky. Treasury’s fears about inflation were incorrect. This was followed by industrial expansion in Midllends. 1930′s were rare a decade in which Britain far ahead of the U.S. and Europe for growth. Therefore, defeatist attitudes of France and not entrenched in Britain.

France was a mirror image. She had gold reserves, so as not to fall completely in spirit, but their use would signify the loss of resilience. Social spending increased every year. Pierre Laval has resorted to dictatorial powers in order to enforce its “500 deflationary decrees.” Machine guns were deployed against the strikers in Toulon. By 1936 the country became neupravyalemoy, the Communists came to power in the Popular Front. Investors are rolling up their funds, France was forced to abandon gold, one way or another. By the time she was a broken nation.

Today, there are similar echoes in the borders of the euro area. Countries caught in the trap of debt deflation because of the excessively powerful currency or euro / “dirty” floating exchange rate, now faced with the trials of Laval. Latvia is more or less accurately reproduces the 500 decrees of deflation.

Greek conservatives have paid for trying to austerity. Greek Socialists won an impressive victory in the elections by promising voters castles in the air. Portugal also limps with a minority government after voters went to the Maoists and Trotskyists. The Romanian Government has collapsed after it was unable to reduce the amount of loans from the IMF.

Irish deflation has reached 6,5%. “We’ve never seen a fall in prices on such a scale: the illusion that money can not rise in its value – it is something that should be seriously reconsidered,” – said the head of CB Patrick Honohen. Good luck.

In political terms, these countries are faced with the fact that traders are called “time decay”. The longer it goes on – all the more aggravated the situation.

ECB President Jean-Claude Trichet, said this week that the euro was not created in order to become the world reserve currency. ” – Too late, sir! China and support its exports, the country’s foreign exchange reserves increased by $ 413 billion in the third quarter. Barclays Capital said that 63% of these assets are in euros and yen.

Thus, the euro is worth 10 yuan, or $ 1.49 against the dollar, as well as close to parity against the sterling. While Asian countries to maintain the desired level of their currencies in order to get their share of exports, this slow torture could continue, nazivisimo the state of affairs in the euro area. Euro is doomed to be strong, unfortunately for them, “- said HSBC strategist David Bloom.

This does not underestimate the gravity of the crisis in the UK. We are in a worse position today than in 1992 or 1931. Our budget deficit is 13% of GDP. We live on £ 175 billion a year beyond our capabilities.

Reduction sterling can be very expensive at this time, and can be run outflow of capital from the capital market. But the risk is in any case, whatever we did. My (unpopular) view is that the Bank of England had saved the country from depression due to the excess of the printing press, offering a market to sell sterling.

David Cameron was not supposed to question the strategy of the bank so easily. The only solution is to cut spending, as did Canada in the early 1990′s, and to offset the impact, it prints as much money as necessary and as long as necessary. The biggest mistake would be repeated mild fiscal and monetary tightening, as it was in Japan in the first part of the lost decade, those actions led to gosudarsvtennomu debt of 215% of GDP. This path leads to death.

Collapsing currency does not look very attractive. Yet there is an iron rule: as soon as the economy of your country has become reckless, you must give the exchange rate correspond to reality. To deny this – then dig deeper and deeper hole for his nation.

The Telegraph
October 18

Profit taking ahead of the weekend allowed the pound to make further ground against the aussie on Friday

admin — Mon, 19 Oct 2009 08:49:00 +0000

Profit taking ahead of the weekend allowed the pound to make further ground against the aussie on Friday is a post from: Forex News

Sterling maintained its rally as investors continued to lock in profits ahead of the weekend, with the price closing the day at 1.7839.

Having climbed to multi-year highs against the pound earlier last week, positive comments from members of the BoE concerning the quantitative easing programme triggered an opportunity amongst investors to take profit, driving the price higher.
Comments on Friday were made that stated the asset purchase scheme is having its desired effect on the UK economy, dulling concerns about the possibility of a further expansion.
There was also a slight pull back in demand for the higher-yielding aussie following a weak earnings report from the Bank of America, which gave investors further cause to cash profits.
This morning, traders have resumed aussie buying, with analysts noting that despite some disappointing US corporate earnings, the market remains positive and high-yielders are still on a rising trend.

Sterling is currently trading higher against the aussie following upbeat comments and a move to cash profits

admin — Fri, 16 Oct 2009 08:07:00 +0000

Sterling is currently trading higher against the aussie following upbeat comments and a move to cash profits is a post from: Forex News

Sterling recovered some of its recent extensive losses against the aussie dollar yesterday, climbing over two cents, to close up at 1.7668.

Bank of England member, Paul Fisher, said yesterday that policy makers would be more likely to pause asset purchases in their upcoming meeting in November, giving themselves the option of “doing more later,” rather than stopping them.
His comments were taken to read that the MPC is unlikely to extend their quantitative easing programme, supporting a slight rise in confidence in the UK economy, strengthening the pound.
In broad terms, the aussie traded strongly against most currencies yesterday as positive economic data in the US led to investors adding to their long positions in the higher-yielding currency.
Indeed in trading this morning, the pound has halted its climb, with the pair currently holding around the overnight closing price, as enduring aussie strength offsets sterling’s rally.

Broad dollar weakness and an increase in demand for sterling has pushed the price back near $1.63

admin — Fri, 16 Oct 2009 08:03:00 +0000

Broad dollar weakness and an increase in demand for sterling has pushed the price back near $1.63 is a post from: Forex News

Sterling achieved a three-week high of 1.6297 against the dollar yesterday, supported by upbeat comments about the UK economy.

The pound jumped nearly three cents, or 1.8%, against the dollar on speculation that policy makers will pause their asset-purchase programme next month as the economy shows signs of recovering from the recession.
The Financial Times cited Bank of England Markets Director Paul Fisher as saying that the asset purchases scheme may be paused to give the central bank the option “of doing more later.”
Analysts suggested that it appeared that the Bank of England was letting it be known in more forceful terms that it is not talking the pound down any longer.
Additionally, the pound benefited from broad dollar weakness as optimism about the global economy and buoyant earnings from Goldman Sachs and Citigroup encouraged investors to move into currencies seen as being higher risk.
Data also revealed that US jobless claims dropped by another 10K week-on-week, and that the inflation figure increased to 0.2%, both of which beat market expectations, lessening demand for the haven currency.

Strong commodity prices and doubts over the UK economy allow the aussie to gain further ground

admin — Tue, 13 Oct 2009 08:56:00 +0000

Strong commodity prices and doubts over the UK economy allow the aussie to gain further ground is a post from: Forex News

The Australian dollar continued to push higher yesterday, advancing over a cent as sentiment towards the higher-yielding currency remained positive.

Commodity currencies, such as the aussie, made progress yesterday in line with stronger prices for oil and metals.
Rallying global equity and commodity markets encouraged the rise in risk appetite in the market, which heightened demand for the aussie dollar.
In the UK, the market still holds the view that further quantitative easing could be announced in November, which has put substantial pressure on the UK currency as other major economies look to wind up stimulus measures.
In trading this morning, the pound has halted its steep decline, with the price currently flat as a weaker-than-expected business confidence survey stemmed demand for aussie assets.

The kiwi was weaker in trading yesterday following some concerning US economic data

admin — Fri, 02 Oct 2009 08:24:00 +0000

The kiwi was weaker in trading yesterday following some concerning US economic data is a post from: Forex News

The pound made gains yesterday, taking support from a revised IMF report and an easing of risk activity to close the day at 2.2316 up 0.7%.

Rising risk aversion enabled the pound to advance over a cent against the kiwi yesterday, with investors retreating into haven currencies.
US employment claims rose last week, posting a figure well above forecast, dulling hopes of a swift recovery in the US, but supported gains for the UK currency.
The negative data led to a sharp retreat in equity markets which prompted investors to sell the higher-yielding currencies.
Additionally, the International Monetary Fund revised their UK growth prediction next year to 0.9% from 0.2%, which boosted confidence in the UK economy.
This morning, sterling has slipped back slightly, currently trading marginally below the 2.23 level ahead of US non-farms payrolls data.

Sterling relinquished strong gains vs euro yesterday as risk appetite eased

admin — Thu, 01 Oct 2009 07:54:00 +0000

Sterling relinquished strong gains vs euro yesterday as risk appetite eased is a post from: Forex News

The British currency, unable to capitalise on strong early gains, lost ground against the euro yesterday, as an easing of risk appetite wore heavily on the fragile pound.

Initially, sterling extended Tuesday’s rebound following a surprising jump in UK consumer sentiment, posting its biggest monthly boost in more than 14 years and signalling growing optimism about the UK economy.
Additionally, the pound found support from signals that the Bank of England may not cut its bank reserves deposit rate anytime soon.
In the afternoon however the pound gave up its gains, as weak US data brushed off on equity markets and sent the pound back down to a close of 1.0915.
In trading this morning though, the single currency has slipped back on speculation that finance ministers and central bankers will discuss the euro’s strength at a G7 meeting later this week.
Manufacturing data is due in the UK today at 09:30, with forecasts predicting a return to expansion in the industry, which may offer the pound some support.

The UK economy is showing signs of recovery, which has buoyed the ailing pound

admin — Wed, 30 Sep 2009 07:56:00 +0000

The UK economy is showing signs of recovery, which has buoyed the ailing pound is a post from: Forex News

In trading yesterday the pound picked itself up from 6-month lows against the single currency, gaining 0.7% as positive data buoyed investor sentiment.

In a final revision, Britain’s second quarter GDP figure was reported as -0.6%, up from a previous revision of -0.7% and strengthening claims that the UK will exit recession in the third quarter.
There was also positive data from the UK CBI retail sales index, which showed considerable improvement from last month, reaching levels well above expectations.
Additionally, lending to individuals rose in August, reflecting both an increase in the willingness of high street banks to extend credit, and also improved consumer confidence in the market as they begin to take on more debt.
In the evening, it also emerged that the BoE may not be planning to lower interest rates, backtracking from King’s recent comments, and enhancing the pound’s yield appeal.
Sterling fared well following the day’s news, but its gains were capped as it was also revealed that the U.K.'s current account deficit widened in the second quarter to its largest level for nearly two years, as investment income narrowed.

Pound Tumbles, Dollar Surges as Risk Aversion Hits Currency Markets (Euro Open)

admin — Mon, 28 Sep 2009 08:35:00 +0000

Pound Tumbles, Dollar Surges as Risk Aversion Hits Currency Markets (Euro Open) is a post from: Forex News

The US Dollar surged higher to start the trading week as stocks sold off across Asian exchanges, boosting demand for the safety-linked currency. The British Pound bore the brunt of the greenback’s assault as risk aversion compounded last week’s dovish rhetoric from the Bank of England.

Key Overnight Developments

• Pound Tumbles Despite BOE Backtracking on King’s Comments
• Japanese Yen Surges on Safety Demand as Stocks Plunge in Asia

Critical Levels

The British Pound and the Euro both suffered sharp losses in overnight trading as stocks tumbled in Asia, driven lower by Friday’s disappointing US economic data, sending the MSCI Asia Pacific regional benchmark index down 1.2% and boosting demand for the safety-linked US Dollar.

Asia Session Highlights

The British Pound raced sharply lower in early trading as currency markets seemingly concluded that the Bank of England suspiciously “protests too much” after the UK Times Online cited unnamed sources at the central bank as saying King was trying to talk down sterling last week. The Pound began to accelerate lower last Monday after the BOE released an article titled “Interpreting Recent Movements in Sterling” as part of its quarterly bulletin which argued that the inability of drying up capital inflows to finance the current account deficit could mean a fall in the “the long-run sustainable real exchange rate”. Sterling bears were given extra fuel last Thursday when Governor Mervyn King said rebalancing the UK economy was “very necessary [and] the fall in the exchange rate that we have seen will be helpful to that process” in an interview with The Journal.

Reserve Bank of Australia Governor Glenn Stevens struck a hawkish tone at a testimony to the Senate Committee in Sydney. Stevens said that Australia’s recession has been mild and the economy has done “quite well” as government stimulus “materially” supported growth, adding 2-3% to local demand. On interest rates, Stevens said that benchmark borrowing costs are “unusually low” and will need to go back to normal levels, adding that inflation targeting will guide the timing of adjustment to “more normal levels”.

Euro Session: What to Expect

A preliminary estimate of Germany’s Consumer Price Index is set to show that prices fell -0.2% in the year to September, marking the third consecutive month that the EU-harmonized metric has printed in negative territory. A reading in line with expectations is unlikely to prove market-moving: economists have called for year-on-year CPI to shrink -0.3% through the third quarter, and averaging September’s would-be reading with those recorded in the previous two months yields just about that outcome. The coming months present an opportunity for volatility, however: consensus forecasts have inflation coming back into positive territory in the fourth quarter and averaging around 1.2% through 2010; if this proves too rosy as the economy falters anew after the boost from fiscal stimulus (both at home and abroad) and the inventory cycle fizzles out, a drop in inflation expectations stands to prolong the slump in the Euro Zone’s largest economy. Indeed, consumers and businesses have little incentive to spend and invest in the present if they reckon prices will be lower in the future, bringing economic activity to a standstill. This will mean the ECB will keep interest rates at current lows longer than nearly all of its major counterparts (with the exception of Japan and Switzerland), weighing down the Euro.

Written by Ilya Spivak, Currency Analyst
Article Source – Pound Tumbles, Dollar Surges as Risk Aversion Hits Currency Markets (Euro Open)

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

admin — Mon, 28 Sep 2009 08:21:00 +0000

Sterling continued to slide vs the euro on the run up to the weekend, but has capped its losses this morning is a post from: Forex News

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.
In trading this morning, slight profit taking has seen the pound cap its losses, with the pair currently trading around 0.15% up for the day.
Market players say that the outlook for sterling does remain bearish though, and it is set to remain the weakest of the major currencies for some time.

The pound’s decline continues, as confidence in the currency is undermined

admin — Fri, 25 Sep 2009 08:14:00 +0000

The pound’s decline continues, as confidence in the currency is undermined is a post from: Forex News

Sterling went into its steepest daily decline against the single currency in 5 months yesterday, losing 1.2%, after Mr. King revealed that he was content with the current value of the pound.

Sterling hit its lowest euro price since early April, extending broad losses after Mervyn King said that a weak pound was supporting a necessary rebalancing of the UK economy.
The euro was also supported by a further rise in business confidence in Germany. Although expectations for the Ifo economic survey were not matched in September’s report, the modest increase reflected optimistic future expectations for economic recovery.
Demand was further eroded as the Daily Telegraph reported yesterday that the Bank of England was set to meet with economists in a "crisis" meeting designed to stem alarm and confusion over the QE program and the weakness of the pound.
Additionally, once the pound broke below the 1.10 level, automatic sell off points were triggered, driving sterling down to a near six month low of 1.0922.
The pound has slid further in trading this morning, losing another 0.5%, and currently trading around 1.0900.