Risk Aversion returns, USD and JPY higher.
The market this week has seen a fresh bout of risk aversion causing stock prices and gold to tumble. As a result both the USD and JPY have appreciated considerably.
GBPUSD has fallen to its lowest levels since May 2009, falling earlier to a low of 1.5655. Some analysts now expect that the Pound will continue to slide against the USD possibly to 1.54 and from there GBPUSD could re-visit the nasty lows of 12 months ago, where GBPUSD traded between 1.3514 and 1.4986 between Jan-Feb 2009. On the other hand, if we see some more positive news we could see GBP rebound past 1.58. However, at the moment it seems that any potential upside should be limited below interbank 1.6070.
In the Eurozone we have seen renewed concerns regarding a number of member’s budget deficits. As a result EURUSD has fallen markedly, hitting a low earlier today of 1.3649. Moreover, EURUSD weakness is spilling over into other crosses and could force the Euro lower against a number of other currencies, including Sterling.
This afternoon at 13:30 we see the release of US Non-Farm payrolls, a major event on the economic calendar. If these numbers disappoint risk aversion could be strengthened further and you would expect both the USD and JPY to benefit from this.
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Sterling has continued its recent climb following yesterday’s comments from Bank of England Monetary Policy Committee member Andrew Sentance, hinting that the Bank’s programme of Quantitative Easing may be put on hold.
Later today we eagerly await the European Central Bank interest rate decision at 12:45 and press conference at 13:30.
On the interbank market Cable (GBPUSD) has pushed through 1.6230 and currently trades at 1.6265, whilst the Pound is also trading above 1.12 against the Euro. EURUSD is currently trading just below 1.45 at 1.4493.
Currency Matters can offer a number of products and strategies which can help you manage your currency risk. Please contact the dealing team for more information.
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After a poor Christmas period for Sterling, the Pound bounced back dramatically yesterday afternoon particularly against the US Dollar. The Pound has continued to climb against the US Dollar hitting a high earlier this morning of 1.6152, a marked improvement from yesterday’s low of 1.5833. The Pound is currently sitting just below 1.12 against the Euro at 1.1190 and 1.6120 against the US Dollar, whilst EURUSD currently trades at 1.4403.
Let’s see what the New Year brings for Sterling!
Best wishes for the New Year from all the staff at Currency Matters.
The currency markets have started the week in a relatively tight range, however it is possible we could see some volatility as any moves in the market could be exaggerated due to thin market conditions. Levels of trading will likely decrease further as we near Christmas.
Major data this week includes UK and US GDP tomorrow, Bank of England minutes on Wednesday and US jobless claims on Thursday.
EURUSD is currently trading at 1.4359, GBPUSD @ 1.6130 and GBPEUR @ 1.1228.
Wishing you a Merry Christmas and a happy New Year!
The US Dollar remains under pressure as gold soars past $1,130 an ounce. EURUSD climbed as high as 1.4993 and has now settled around 1.4970. The Pound has also had a good day against the US Dollar hitting an interbank high of 1.6780 so far. The markets will now be eyeing Fed Chairman Ben Bernanke’s speech due later today at 17:15.
Over the weekend GDP figures released from Japan smashed market expectations posting third quarter growth at 4.8%. Of course this can largely be attributed to the massive government stimulus package so it is unlikely that these levels of growth will be sustainable.
Sterling will face a number of tests this week as the Bank of England’s Quantitative Easing Programme will take the limelight again. UK inflation data is due tomorrow (17/11) morning at 09:30 whilst the Bank of England Minutes from November’s Monetary Policy Committee (MPC) meeting will be released at 09:30 on Wednesday 18th November.
Risk appetite has returned to the market today as the latest GDP figures from the US suggest that the US is out of recession. The US GDP figures released earlier today beat market expectations with an annualised rate of 3.5% vs 3.2% expected. Whilst these figures are positive it remains to be seen how sustainable these levels of growth are, especially after the massive government stimulus has finished working itself through the economy.
The following improvement in confidence has led to safe haven currencies such as the USD and JPY coming under downward pressure.
Sterling has advanced through Interbank GBPUSD 1.65 and through Interbank GBPEUR 1.1100.
Expect plenty of volatility as we enter November as sentiment remains fickle. Both the Bank of England and the European Central Bank meet on November 5th. Analysts will be especially keen to see if the Bank of England extends its Quantitative Easing program and if so by how much. Some economists suggest that we could see an extension by as much as Â£50B but the consensus seems to suggest an extension of Â£25B is the most likely outcome.
Currency Matters can offer a number of products and strategies which help you manage your currency risk. Please contact the dealing team for more information.