Tag Archives: US Dollar

Cable on Course for 16 month High Test

GBP/USD has continued its advance from last week as it closes in on a 16 month high of 1.6309. Cable broke through several key levels of resistance last week, first at 1.6067 before then pushing on through 1.6124. The strong advance this week has been aided by the perceived progress being made in the US regarding proposed tax hikes and spending cuts, necessary in order to stave off the fiscal cliff. This has led to the Greenback depreciating against the majority of its counterparts this week and for Sterling this has meant the 1.6309 target has remained well in sight.

The pair have been trading consistently within a 10 cent range for over a year now and a break outside of this range could potentially move that ten 10 cent range directly above where it currently is.

Consequently, a consistent break above 1.63, and the current 16 month high of 1.6309, could well bring about a new trading range with a high of 1.70+. However, in the short term, the next key levels of resistance likely to be targeted are 1.6333 and then 1.6418.

The Bank of England minutes for December were released earlier this morning and confirmed that the Monetary Policy Committee voted for unchanged Quantitative Easing as expected. Although one member did back increasing asset purchases by £25 billion, this is unlikely to have much of an impact on the markets. Although, with little downside sentiment attached to this data, this could stoke a fake break out above 1.6309 before the pair drops back off.

With UK Retail Sales and US GDP figures due out tomorrow, and UK GDP data set to be released Friday, there still remains potential for increased volatility in GBP/USD over the next couple of days, not forgetting that the fiscal cliff has by no means been conquered just yet. However, with Cable nearing a 16 month high at present, regardless of any potential movement, now is certainly a great time to buy Dollars.

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Agree to Disagree

Offers and counter offers were exchanged yesterday as President Barack Obama and House Speaker John Boehner spoke at length regarding how to deal with the fiscal cliff. Accounts differ on exactly what was achieved/agreed during this discussion, but it would appear that markets are optimistic that a deal on the fiscal cliff will be reached on time, before the January 1st deadline.

The Dollar has weakened this morning against Sterling and the Euro, suggesting the talks regarding the fiscal cliff are progressing well, or at the very least they are being perceived to do so. GBP/USD has breached a key level of resistance this morning, breaking through 1.6124, and the next key area to be tested is likely to be 1.6182. A break above this level could see a rise back to the twelve month high of 1.63+ and given the fact the pair are currently trading in an upward trend, this is a distinct possibility. However, failure to continue this advance could see a reversal back to 1.60.

Similarly the Euro has broken out of a key downward trend this week, for the second time in a month, and this is a clear indication that the Euro could strengthen further. However, any movement in the Euro is heavily dependent on how the Eurozone situation progresses and how well European finance leaders are able to deal with the ever continuing debt problems facing Greece.

Attention this afternoon will turn to the US as the Fed is due to make a decision on whether or not to keep interest rates at 0.25%. The Fed is expected to maintain its current rate and any variation would be a major surprise to the markets, which could potentially destabilise the economy and damage the already fragile recovery. However, the main focus will be on the Feds decision regarding its monthly asset purchase program. Operation Twist as it is currently known is due to come to an end this month and markets are waiting to see whether this will be continued through the medium of another QE program.
Please find a summary of key economic events this week:

12.12.12
07:00 German Consumer Price Index
07:00 German Harmonised Index of Consumer Prices
09:30 UK ILO Unemployment Rate
09:30 UK Claimant Count Change
10:00 EU Industrial Production
17:30 US Fed Interest Rate Decision
19:00 US FOMC Economic Projections
19:00 US Monthly Budget Statement
19:15 US Fed’s Monetary Policy Statement

13.12.12
09:00 ECB Monthly Report
13:30 US Initial Jobless Claims
13:30 US Producer Price Index
13:30 US Retail Sales
13:30 US Business Inventories

14.12.12
European Council Meeting
08:28 German Markit Manufacturing PMI
08:28 German Markit Services PMI
08:58 EU Markit Manufacturing PMI
08:58 EU Markit Services PMI
10:00 EU Consumer Price Index
10:00 EU Employment Change
13:30 US Consumer Price Index
14:00 US Markit Manufacturing PMI
14:15 US Industrial Production

BoE and ECB

The Euro has retreated today after the European Central Bank kept rates unchanged at 0.75% and slashed its growth forecasts for 2013. Projected Eurozone growth is now expected to range between -0.9% and +0.3% suggesting that it is more than likely that the Eurozone economy will contract next year.

In the UK, the Bank of England as expected kept interest rates at 0.50% and the Bank’s Quantitative Easing Asset Purchase Programme was also maintained at £375bn.

As a result the Pound is up against the Euro by nearly 1 cent and currently trades at 1.2395 (0.8068) and the Euro is down 1 cent against the US Dollar at 1.2980. The Pound trades relatively flat against the US Dollar currently at 1.6090 on the interbank market.

Matthew Porter 15:15 06/12/12

Increased Optimism

The Dollar has weakened against the majority of its counterparts this morning following increased optimism regarding the Eurozone after a debt agreement concerning Greece was reached in Europe last week. Whilst some market analysts argue that the current deal is insufficient, this agreement has at the very least sent a message to global markets that Europe will not let Greece fail, and it will remain in the Eurozone. This has led to rising indices across Europe, most notably the Athens Composite, which is up 9% over the last two months. Additionally, this morning Angela Merkel has, for the first time ever, indicated that Germany may accept a write off of Greek debt. This could be a very significant step in creating the first truly viable path for Greece to escape the black hole that it is currently in, however the key word here is; ‘may’.

Furthermore, China has posted positive manufacturing figures this morning. The Chinese HSBC Manufacturing PMI hit 50.5 this month, increasing ever so slightly from 50.4 last month. This has consequently, along with the European factors above, increased risk appetite among investors and has resulted in market participants selling off their ‘safe haven’ Dollar holdings in search of riskier assets.

This afternoon we have manufacturing data and PMI figures coming out of the US, should they be positive we could see the Dollar strengthen slightly, however the main focus for Dollar movement this month will be the ever approaching the fiscal cliff. Should little progress be made on this issue and the January 1st deadline look increasingly doubtful, we could see the Dollar strengthen substantially.

Sterling is up today against both the Euro and the Dollar following positive UK manufacturing data. The UK Markit Manufacturing PMI hit 49.1 this morning, not only increasing from last month but also beating market expectations of 48.0. Following the release of the figures at 09:28 this morning, Sterling has risen to a daily high of 1.2325 against the Euro and GBP/USD has broken through a downward trend hitting an interbank high of 1.6086 before falling back a little. The current rate is hovering around 1.6067, should the rate push above this we could see 1.6124 targeted. Should the dollar not break through this level, the rate may well fall back towards 1.60.

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

03.12.12
Eurogroup Meeting
01:45 Chinese HSBC Manufacturing PMI
08:53 German Markit Manufacturing PMI
09:28 UK Markit Manufacturing PMI
13:58 US Markit Manufacturing PMI
15:00 US Construction Spending
15:00 US ISM Manufacturing PMI

04.12.12
European Finance Ministers Meeting
03:30 Australian RBA Interest Rate Decision
09:30 UK PMI Construction
10:00 EU Producer Price Index
14:00 Bank of Canada Interest Rate Dec ision

05.12.12
08:53 German Markit Services PMI
08:58 EU Markit Services PMI
09:28UK Markit Services PMI
10:00 EU Retail Sales
13:15 US ADP Employment Change
15:00 US Factory Orders
15:00 US ISM Non-Manufacturing PMI

06.11.12
09:30 UK Total Trade Balance
10:00 EU GDP
11:00 German Factory Orders
12:00 UK BOE Interest Rate Decision
12:45 EU ECB Interest Rate Decision

07.12.12
00:01 RICS Housing Price Balance
09:30 UK Industrial Production
09:30 UK Manufacturing Production
11:00 German Industrial Production
13:30 US Average Hourly Earnings
13:30 US Nonfarm Payrolls
13:30 US Unemployment Rate

Mark Webster

Obama Claus is Coming…

All President Obama wants for Christmas is a deal to be agreed on how to deal with the looming fiscal cliff, something that would be a welcomed present for many market participants also. The deadline is January 1st 2013. However, in a speech last night, President Obamas strong rhetoric suggested that if Republicans, and Democrats alike, behave for the next couple of weeks, a deal could be reached a week early.

Lloyd Blankfein, CEO of Goldman Sachs, stated that he believes the Presidents current plan regarding the fiscal cliff is ‘very credible’. It would appear that US governors are beginning to appreciate the importance of reaching an agreement sooner rather than later, and it would also seem that markets are beginning to believe in their elected officials. According to a Bloomberg Poll only 6% of investors now believe that US politicians will not reach some sort of agreement. As investors decisions become more and more headline driven it is more than likely we will a reasonable amount of movement in the Greenback in the run up to the New Year, with bias expected to be positive should a fiscal cliff agreement become anticipated.

The Dollar is trading relatively flat against Sterling this morning, however it has weakened against the Euro, as the Euro reached 1.2990, as investors become nervous in the run up to some key meetings today between Timothy Geithner, the US Treasury Secretary, and the four top leaders in Congress.

Mark Webster

Deal or No Deal?

Deal. A deal has definitely been done, but was it a good one? Let alone good, was there even any point to it? These are the questions that market experts are starting to ask as doubts grow as to whether this deal will actually do anything to solve Greece’s long term national debt problem.

European finance ministers last night, as expected, agreed to release the next tranche of financial aid to Greece. The meagre sum of €43.7 billion Euros worth of loans starts to be paid to the debt ridden country from December. It is believed that this will help plug the gap in the country’s finances until the end of 2014, however for any true progress to be made many market analysts are calling for at least some of Greece’s outstanding debt to be written down. It is becoming ever more apparent that simply applying increasingly stringent austerity is not having the desired effect, in fact it could even be exacerbating the problem.

Closer to home, yesterday George Osborne announced who is set to succeed Sir Mervyn King as Governor of the Bank of England next year. The decision to name Mark Carney, currently the governor of the Canadian central bank, seems to have taken most people by surprise. However, whilst some of the decisions that Mr Osborne has made whilst Chancellor of the Exchequer have come under scrutiny, this one seems to have been well received and was even deserving of approval from his opposite number, shadow Chancellor Ed Balls. Mr Carney has been widely commended during his time at the Canadian central bank, where he has successfully navigated Canada through some of the toughest global economic conditions in living memory, with Canada fairing much better than many other countries during this time.

This morning Sterling improved to a morning high of 1.2384 against the Euro, whilst the Dollar has also risen against the Euro, with EUR/USD hitting 1.2935. The weakening Euro comes on the back of the agreement made last night between European finance meetings, as markets, whilst relieved a deal was made, are concerned that it will do little to stabilise Greece’s finances in the long term. We could see further movements this afternoon as figures for US Durable Goods Orders are released. Positive results could see the Dollar appreciate further and potentially compound the weakening Euro.

Mark Webster

The Euro Strikes Back

The Euro is on the up. This morning it is trading higher against the Pound, Dollar, and Yen on the back of positive data coming out of China, where the HSBC Manufacturing PMI hit 50.4, a thirteen month high. Sentiment is now relatively optimistic within the markets as a result of this Chinese data, with many market participants believing this signals an end to China’s slowdown and potentially a return to China’s customary 8% plus growth.

A positive Chinese outlook is encouraging for the Euro and coupled with the anticipation that an agreement on Greece will soon be reached, these two factors have led to a slightly improved Euro this morning. European PMI data has also contributed to the Euros gains as figures released were slightly better than markets had originally feared. German Manufacturing PMI hit 46.8 surpassing expectations of 46.0 and EU Markit Manufacturing PMI also did better than expected, recording an improvement to 46.2, although EU Markit Services PMI did decline this month to 45.7.

Sterling has dropped from 1.2432 against the Euro this morning to its current low of 1.2385. The Euro is also up against the Dollar today hitting a high of 1.2883, after gradually increasing from 1.2831 last night. It is possible that we could see further movement in the Euro this afternoon as EU Consumer Confidence figures are due out at 15:00, however trading volumes are likely to be lower today given that it is Thanksgiving in the US.

Mark Webster

Tension in the Air

The atmosphere is tense in Europe this morning as European finance Ministers make final preparations before a key meeting tomorrow regarding the situation in Greece. To say that reaching an agreement tomorrow is crucial would be an understatement. Greece quite frankly is facing imminent collapse, if this were to materialise it would invariably cause severe problems for the rest of the already troubled Eurozone. The rhetoric coming out of Europe today and at the weekend seems to be one of unanimous determination to reach a final solution, Christine Lagarde commented:

“I am always trying to be constructive but I am driven by two objectives…to build and approve a program for Greece that is solid, that is convincing today, that will be sustainable tomorrow, that is rooted in reality and not in wishful thinking.”

One would like to think that all European finance ministers share such positive intentions, however if previous meetings in Europe are anything to go by, it is going to take a lot more than a simple desire to create a sustainable program for Greece, to fix the problem.

In the US concerns over the looming fiscal cliff have eased following a Speech by US President Barack Obama, in which the President expressed confidence in his governments’ ability to reach an agreement on how to deal with the cliff. This has led to the Dollar weakening against the majority of its counterparts this morning. Notably the Pound has risen for the third straight day against the Greenback following positive UK housing data that came out this morning.

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

19.11.12
00:01 UK Rightmove House Price Index
05:00 Japanese Leading Economic Index
15:00 US Existing Home Sales Change

20.11.12
Bank of Japan Interest Rate Decision
European Finance Ministers Meeting
00:30 Australian RBA Meeting’s Minutes
07:00 German Producer Index
13:30 US Housing Starts MoM
17:15 US Fed Governor Bernanke Speech

21.11.12
UK Bank of England Minutes
09:30 UK Public Sector Net Borrowing
13:30 US Initial Jobless Claims
13:58 US Markit Manufacturing PMI
14:55 US Reuters/Michigan Consumer Sentiment Index

22.11.12
08:28 German Markit Manufacturing PMI
08:28 German Markit Services PMI
08:58 European Markit Manufacturing PMI
08:58 European Markit Services PMI
08:58 European Markit PMI Composite
15:00 European Consumer Confidence

23.11.12
European Council Meeting
07:00 German GDP
09:00 German IFO Business Climate
09:00 German IFO Current Assessment
09:30 UK BBA Mortgage Approvals
13:30 Canadian Consumer Price Index

Mark Webster

From One Vote to Another

From one vote to another. Markets today will be bracing themselves once again for potential turmoil in the run up to another key vote, one that could cause much more movement than the US presidential election ever threatened.

We have become accustomed to leaders pleading and begging for votes over the last couple of weeks, however it is now a different leader in this position; Greek Prime Minister Antonis Samaras. As I have mentioned in previous blogs, Greece could face bankruptcy by the end of the month should they not secure further financial assistance. In order to obtain such funding the Greek government must vote to approve tough austerity measures that have been agreed with the Troika, with the first step of this process taking place today. Should this vote not be passed substantial uncertainty is likely to be seen within the markets with the Euro likely to suffer heavily as talks of a Greek exit will inevitably resurface.

The dollar is slightly down this morning against the Euro and Sterling following Barack Obamas re-election as US President. This may well be the result of market participants beginning to move away from the safety of the US dollar as uncertainty has now been reduced and risk appetite invariably increases. The Dollar has also potentially weakened based on the belief that President Obama’s win has paved the way for further monetary easing, that said however, round three of Quantitative Easing did not do much to weaken the Dollar as such policies have become to be expected and therefore are already priced in.

In comparison to the importance of the Greek austerity measures vote, there is little economic data out today of any real significance. However so far this morning EU retail sales figures have been released recording a drop of -0.8% which is slightly better than the market expectation of -1%. We will also see German Industrial Production figures released at 11:00 GMT which could move the markets slightly, however make no mistake, the key event today will be the outcome of the vote in Greece which has the potential to cause significant movement in the markets.

Mark Webster

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