Tag Archives: Pound

Bank of England

As expected The Bank of England’s Monetary Policy Committee (MPC) voted to maintain the Bank Rate at 0.50%. The MPC also voted to maintain the stock of purchased assets financed by the issuance of central bank reserves, known as Quantitative Easing, at £375 billion.

The Pound remains well supported and trades near the recent highs. At 12:30 the Pound was trading on the interbank market at 1.6777 against the US Dollar and at 1.2095 against the Euro.

 

EUR & AUD Spike Higher

Today as expected, both the Bank of England and the European Central Bank kept their key interest rates on hold at 0.50% and 0.25% respectively. The Bank of England also kept its Quantitative Easing Asset Purchase Facility on hold at £375bn.

In the following ECB press conference, ECB President Mario Draghi surprised the markets with his upbeat comments regarding Eurozone inflation and growth. Inflation is expected to climb from February’s 0.8% to 1.0% by the end of the year, 1.3% in 2015 and 1.7% in Q4 of 2016. Growth forecast was revised up to 1.2% in 2014. For 2015, growth is projected to be 1.5% and 1.8% for 2016.

As a result the Euro has made notable gains against the US Dollar and the British Pound. EURUSD appreciated from a daily low of 1.3722, hitting a high of 1.3858, and currently trades at 1.3843 (0.81%). Whilst EURGBP appreciated from 0.8207 (1.2185), to 0.8287 (1.2067), and currently trades at 0.8274 (+0.76%).

Elsewhere, the Australian dollar appreciated sharply today on better than expected economic data. Australian retail sales rose by 1.2% month on month and the trade surplus widened to AUD 1.43bn.

As a result AUDUSD appreciated from 0.8973 to a high of 0.9091 and the Pound depreciated by 2 cents against the Australian Dollar from 1.8624 to a low of 1.8407.

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ECB Rate Cut

The Pound has surged a cent higher against the Euro today following today’s decisions from the Bank of England and the European Central Bank. The Bank of England Monetary Policy Committee voted to maintain interest rates at 0.50% and its Quantitative Easing Asset Purchase Programme at £375bn whereas the European Central Bank voted to cut their interest rate by 0.25% from 0.50% to 0.25% resulting in a Sterling interest rate differential advantage of 0.25%.

GBPEUR hit a high of 1.2045 from an earlier low of 1.1890 before falling back to 1.1980. The Euro also fell against the US Dollar with EURUSD falling from a high of 1.3528 to a low of 1.3296 before recovering back above 1.33 and currently trading at 1.3365. The Pound is down against the USD from a high of 1.6089, hitting a low of 1.6010 before recovering slightly and currently trading at 1.6025.

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Bank of England maintains Bank Rate at 0.5% and the size of the Asset Purchase Programme at £375 billion

The Pound has fallen sharply following today’s statement from the Bank of England. The Bank warned that “in the Committee’s view, the implied rise in the expected future path of Bank Rate was not warranted by the recent developments in the domestic economy”. The Bank’s statement immediately scaled back market expectations of a rate rise from the Bank and with UK interest rates expected to remain low for a prolonged period of time the Pound has fallen markedly. Against the Euro the Pound has fallen from an earlier high of 1.1751 to 1.1585 and against the US Dollar the Pound has fallen from 1.5288 to 1.5075.

Bank of England Statement
http://www.bankofengland.co.uk/publications/Pages/news/2013/007.aspx
The Bank of England’s Monetary Policy Committee today voted to maintain the official Bank Rate paid on commercial bank reserves at 0.5%. The Committee also voted to maintain the stock of asset purchases financed by the issuance of central bank reserves at £375 billion.
Since the May Inflation Report, market interest rates have risen sharply internationally and asset prices have been volatile. In the United Kingdom, there have been further signs that a recovery is in train, although it remains weak by historical standards and a degree of slack is expected to persist for some time. Twelve-month CPI inflation rose to 2.7% in May and is set to rise further in the near term. Further out, inflation should fall back towards the 2% target as external price pressures fade and a revival in productivity growth curbs domestic cost pressures.

At its meeting today, the Committee noted that the incoming data over the past couple of months had been broadly consistent with the central outlook for output growth and inflation contained in the May Report. The significant upward movement in market interest rates would, however, weigh on that outlook; in the Committee’s view, the implied rise in the expected future path of Bank Rate was not warranted by the recent developments in the domestic economy.

The latest remit letter to the MPC from the Chancellor had requested that the Committee provide an assessment, alongside its August Inflation Report, of the case for adopting some form of forward guidance, including the possible use of intermediate thresholds. This analysis would have an important bearing on the Committee’s policy discussions in August.

In the light of these considerations, the Committee voted to maintain the size of its programme of asset purchases financed by the issuance of central bank reserves at £375 billion. The Committee also voted to maintain Bank Rate at 0.5%.

The minutes of the meeting will be published at 9.30am on Wednesday 17 July.

To Triple Dip, or Not to Triple Dip

Movements in Sterling have been relatively restrained this week, with little economic data having been released attention is being focussed on GDP figures due out in the UK and the US at the end of the week. Market expectations are for a 0.1% increase in UK GDP when the figures are released tomorrow morning, however with potential increments being so fine, the margin for error is miniscule. Whatever the result, the effect on the UK economy is likely to be just as miniscule in the short term, however the opposite couldn’t be more true for the UK coalition government and their religious adherence to “Plan A”.

Should the figures tomorrow show that the UK has slipped into recession for the third time in as many years, the subsequent pressure heaped upon George Osborne could be enough to bring the Chancellor to tears for the second time in as many weeks. Furthermore, weak GDP figures would add emphasis to Christine Lagarde’s comments last week that Mr Osborne should consider rethinking the government’s austerity strategy. The comments last week were a surprising contradiction of the IMF’s long standing support for the UK’s deficit reduction strategy, however perhaps after over two years of trying and little signs of improvement in the economy, even the IMF are now beginning to think that a change of plan may be necessary for the UK government.

With very little economic data due out today, attention has turned to Germany this morning where business environment surveys have been released. The German IFO Business Climate and IFO Current Assessment figures showed falls in April to 104.4 and 107.2 respectively. The euro weakened following the immediate release of this data as the figures were substantially below market expectations. GBP/EUR rose to a daily high of 1.1763 before falling back to 1.1739, whilst EUR/USD recovered to 1.2994 after having dropped off to 1.2954 immediately after the IFO data release. Little activity is expected in the markets this afternoon until US Durable Goods figures are released which could stoke some movement, however volatility is likely to be restricted as market participants await the key GDP data from the UK tomorrow and the US on Friday.

Please find a summary of this week’s economic calendar below:

25.04.13
09:30 UK GDP
13:30 US Initial Jobless Claims
23:45 New Zealand Trade Balance

26.04.13
00:30 Japanese Consumer Price Index
04:00 Japanese Interest Rate Decision
13:30 US GDP
13:30 US Personal Consumption Expenditures Prices
14:55 US Reuters/Michigan Consumer Sentiment Index

Sterling falls as the UK loses AAA credit rating

The Pound has fallen further this morning as the financial markets react to the loss of the UK’s AAA credit rating. Moody’s cut the UK’s credit rating from AAA to AA1 citing ‘challenges that subdued medium-term growth prospects pose to the government’s fiscal consolidation programme, which will now extend well into the next parliament’. This is the first such credit rating downgrade since 1978. The Pound is now trading at its lowest level against the Euro since October 2011 and the lowest level against the US Dollar since July 2010. The Pound has depreciated 6% this year and further falls in Sterling are possible.

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Euro Appreciates

The Euro has continued to appreciate following Thursday’s European Central Bank press conference where ECB President Mario Draghi failed to meet market expectations by not hinting at a rate cut in the coming months.

GBP/EUR is currently trading at 1.2070, a key level of support, after having broken through 1.2168 on Friday, a level which had held for the previous nine months. Todays’ weakening continues a seven day trend for Sterling, as Britain’s position within Europe becomes more and more ambiguous. David Cameron’s attempt to tread a fine line between Conservative Eurosceptic’s and pro-European business leaders is proving difficult and his bid to negotiate a reduction in powers held by Brussels over Britain, whilst maintaining the UKs membership, would appear impossible. Any concrete signs of a full withdrawal of the UK from the EU could prove very negative for Britain and would likely stifle economic growth for the country. Leaders from across Europe and even the US have warned Britain of the damaging effects such a move could have, and the markets would appear to be making their feelings clear too as the Pound continues to weaken.

Elsewhere in the world today, the Yen has continued to weaken as newly elected Japanese Prime Minister Shinzo Abe, looks set to elect a central bank chief who will continue to expand monetary easing in the country. In a further attempt to increase the countries competitiveness internationally, it is hoped that weakening the country’s currency will help drag Japan out of decades of economic stagnation.

EUR/USD broke above a key Fibonacci level of on Thursday and has continued its appreciation since. The pair is currently trading at 1.3368 and should the Euro continue to strengthen the next price level we are likely to see will be at 1.3487, however should momentum dissipate the pair may well fall back to 1.3143.

Cable is currently trading at 1.6124, a significant price level that has been mentioned in previous blogs. We are likely to see the pair trade between 1.6010 and 1.6309 until a consistent break is made either side of this channel. We may have to wait until next month until we actually see this though, when the effects of the delayed fiscal cliff remerge in Washington and US politicians once again commence battle, this time over government spending.

Please find a summary of this week’s economic calendar below:

14.01.13
10:00 EU Industrial Production
15:30 Bank of Canada Business Outlook Survey
21:00 US Fed’s Bernanke Speech

15.01.13
01:00 UK RICS Housing Price Balance
07:00 German Consumer Price Index
08:00 German Gross Domestic Product
09:30 UK Consumer Price Index
09:30 UK Producer Price Index
09:30 UK Retail Price Index
13:30 US Producer Price Index
13:30 US Retail Sales

16.01.13
10:00 EU Consumer Price Index
13:30 US Producer Price Index
14:15 US Industrial Production
19:00 US Fed’s Beige Book

17.01.13
00:30 Australian Unemployment Rate
09:00 ECB Monthly Report
13:30 US Housing Starts
13:30 Building Permits
13:30 US Initial Jobless Claims

18.01.13
02:00 Chinese GDP
02:00 Chinese Industrial Production
02:00 Chinese Retail Sales
09:30 UK Retail Sales
14:55 Reuters/Michigan Consumer Sentiment

UK Economy Emerges from Recession

Christmas came early this morning for the UK as GDP figures confirmed, somewhat emphatically, that the UK has officially come out of recession. David Cameron declared yesterday during a lively Prime Minister Questions, at the end of a passionate statement regarding the strengthening UK economy to opposition leader Ed Milliband, that ‘the good news will keep coming’. Despite this statement, even the Prime Minister himself must have been pleasantly surprised this morning when the data was officially released, confirming a UK GDP Q3 increase of 1%, beating market expectations of 0.6%. This positive sentiment was conveyed in the markets as GBP/EUR jumped 35 pips in the ten minutes following the release. A large part of this increase is likely to be due to the effect the Olympics had on the economy as Olympic Games ticket sales helped revive growth. These results, whilst positive, should be considered with cautious optimism. Bank of England Governor Mervyn King commented yesterday that whilst the UK economy continues to recover, it is proceeding to do so at a ‘slow and uncertain’ pace. All of this means that the Bank of England’s Monetary Policy Committee will have a lot to think about when they meet on the 8th November to decide the UK’s monetary policy.

The economic data this morning from the UK contrasts drastically to the consistently negative information that was released yesterday morning in Europe. Between eight and nine AM yesterday nearly ten pieces of individual European economic data was released with each one being negative and failing to meet market expectations. This quite clearly hit the Euro as we saw nearly one cent fall off both EUR/GBP and EUR/USD following the data release. European leaders offered little help for the Euro either, as has come to be expected, following European Central Bank President Mario Draghi’s meeting with German lawmakers. Truth be told little was expected to come from this meeting which was more of a wooing campaign for Mr Draghi who is keen to gain the support of the German public to ensure the countries commitment to the ECB’s bond buying program which is hoped will help sure up the Eurozone.

Mark Webster
25/10/12

ECB & BoE

The Euro has appreciated today following the European Central Bank’s decision to hold rates at 0.75%, pushing the Euro through the psychological level of 1.30 against the US Dollar and consolidating above 0.80p, currently at 0.8045, against the Pound.

Elsewhere, as expected the Bank of England voted to keep interest rates on hold at 0.50% and to continue with its programme of asset purchases known as Quantitative Easing (QE) at current levels totalling £375bn. Following the move in EUR/USD the Pound has ended the day up against the US Dollar at 1.6170 but down against the Euro at 1.2428.

Regarding the future direction of Bank of England rates and QE, and therefore the Pound’s value, focus will now turn to UK inflation data due to be released on 16th October and the minutes of today’s Bank of England meeting due to be published at 09:30 on Wednesday 17th October.

17:00 04.10.12

EURO

The Euro has continued to come under strong selling pressure as the European Central Bank has indicated that it will not accept Greek government bonds as collateral. EURUSD has fallen from the morning high of 1.2282 to a low of 1.2144. 1.2144 representing the lowest EURUSD exchange rate since June 2010 when the rate hit a low of 1.1876.

The Pound has made strong gains against the weakening Euro hitting a high earlier of 1.2866, the highest level since October 2008. Against the US Dollar the Pound tracked the sharp falls in EURUSD with GBP falling from 1.5724 to a low of 1.5626.

20/07/12 15:20