The currency blog

The CBI (Confederation of British Industry) commented that the recession will be shorter and less severe than previously expected. The CBI believes that the pace of contraction will moderate by the end of this year and moderate growth will materialise early next year. They also scaled back their forecast for unemployment from 3.2m to 3.03m by the second quarter of 2010. However it warned that the recovery would be “slow and gradual” and it would take time to judge whether recent good news will turn into sustainable growth in the economy. This echoes the caution noted by Alistair Darling and comments from Bank Of England officials. Sterling continues to hold respectable levels across the markets, it has retraced a little against the US dollar which is due to US dollar strength over sterling weakness which we will go into shortly..it has this morning hit a new 2009 high of 1.18 against the euro and holds above 160 against the Japanese Yen.

The euro is under pressure this morning against the USD and sterling following an article in the Daily Telegraph reporting of warnings to be released on the credit conditions in Germany. The DIHK survey to be released this week is expected to confirm that credit conditions for large German companies are not easing despite the interest rates being cut to 1%. This will be a definitive blow for the Eurozone as it essentially affirms that the ECB have not done enough in easing credit conditions…this could lead to the ECB embracing further Quantitative Easing measures. The problem for the Eurozone and the euro is that these measures will not commence until July and could see the Eurozone sticking out like a sore thumb as other major economies drive towards receovery- this will naturally be euro negative.

On top of this negative slant for the euro, IMF’s Strauss-Kahn has re-empahsised concerns over the budget situation in Latvia, he said “The IMF is especially concerned about the fact that the necessary measures which have to be undertaken to fix the important budget deficit should not hurt the poor, primarily.” Escalation of budgetary concerns in Latvia will weaken the euro and Swedish Krona.

The main gainer in the markets since Friday is the US dollar. Risk appetite has waned and concerns in Latvia, North Korea and Tehran are encouraging Yen and Usd buying. The USD has also gained support in its status as a reserve currency from Russia and Japan. Kaoru Yasano, Japan’s finance minister, said his trust in US treasuries was “absolutely unshakeable”. Naturally any diversion from the US dollar as the natural reserve choice would hit the US dollar very hard.

On the back of risk appetite waning we have seen a slump in commodity based currencies such as the AUD, CAD and NZD.

What is wireless internet?

Simply put, this typically means a connection to the internet without having to plug a cable into your computer from an internet receiver (Router). The term ‘WI-FI’ is often used to refer to wireless internet.

Firstly, if you already have internet and simply wish to have it relayed wirelessly to other parts of your dwelling, your router should be wireless (usually obvious from its small antennae). With a simple configuration you can have wireless access directly. You may have to upgrade your router.

If you do not have a fixed line internet connection with a router, you must get your internet signal from someone else’s. This would usually be from a company offering such services commercially. In some cases a community may get together and provide wireless internet access to all living in that community. This is provided by a company solely for those within the contracts.  To ensure that only those who are eligible can connect to this type of connection a code is usually provided.

Many communities install a wireless access service for their residents. Sadly in some cases, these are often wholly inadequate. Often the contract is gained on price and may not include sufficient antennas to provide a good strong signal to all homes. Or it may be that the providing company do not provide a sufficient speed to cater for all using it. Internet is measured in bandwidth. The higher the bandwidth: the stronger the signal, the more capacity for all to share and the faster the navigation. Read the rest of this entry »

Has sterling broken the back of recent USD and euro strength witnessed in the last 6 months? You cannot take this for granted as sterling remains a fragile entity- we witnessed this in last weeks sharp sell off in sterling amid the political furor. The fact that the pound has recovered strongly is testament to increasing optimism for a recovery in the UK economy and also recovery in the global markets. Cable (GBP/USD) has moved back over 1.65, sterling has consolidated at 2009 highs against the euro and we are still above 160 against the Yen. Sterling has had a range of positive economic indicators of late and most recently a survey by Gfk/NOP, a leading market research agency showed that inflation expectations for the coming year rose to 2.4% in May from 2.1% in Feb. Also we had further good news in the housing sector as the Council of Mortgage Lenders reported that mortgage approvals rose 16% month on month in April and loans to first time buyers improved by 11%. Sterling was also supported with confirmation of the Barclays/Blackrock deal completing- helping sterling through expected M&A flows materializing.

On the flipside we have seen sterling fall off a cliff on a number of occasions. Alistair Darling featured in a story in the FT called for caution on recent signs of an economic recovery in the UK. He signaled the threat of inflationary pressure from rising oil prices could hamper a recovery. Oil prices have risen swiftly to over $70 as optimism improves. BoE member Paul Fisher backed up the call for caution stating that policymakers should not be complacent and warns that there is a major downside risk to growth still evident. In my view sterling is not out of the woods yet and may still trip on a few branches but the worst is behind us.

The US dollar looks like a currency in no mans land…yesterday data pointed to a sharp drop in jobless claims and an improvement in retail sales- yet the dollar was sold. The dollars problem is that risk appetite is fuelling dollar selling and concerns over the US fiscal deficit are not supporting the dollar on good news. The euro is also looking a little jittery on concerns of banking issues yet to emerge- this concern was underlined by comments from Deutsche that German, Irish and Nordic banks still look weak. Eurozone industrial production just release came in worse than expected at -1.9% month on month. EUR/USD has moved off this mornings high at 1.41 and is looking at the moment to test the 1.40 level on the downside. Sterling looks consolidated at 1.17 against the euro.

No real data of note today- G8 are meeting in Lecce but no immediate impact is expected to fall into the markets.

Ronaldo deal getting more expensive by the moment as pound hits new highs against the euro

Christiano Ronaldo’s proposed transfer to Real Madrid was announced on the day the pound hit its highest level against the euro for six months - and until the paperwork is signed and sealed every rise will costing the Spanish club more money.

The pound hit 1.17 euros on Thursday, up from lows of 1.07 in January, and currency experts have calculated that each cent the euro falls will cost the Spaniards an extra one million euros.

The £80million price the two clubs have agreed would have cost Real Madrid €83 million in January when the pound was much weaker, but at today’s exchange rate the same sterling amount will cost Real Madrid €93 million.

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Sterling has again pushed higher on a trade weighted basis as optimism continues to grow on an imminent recovery in the UK. The National Institute for Economic and Social Research (NIESR) said output grew 0.1% in May and 0.2% in April. The data suggests that the UK has become the first major economy to exit the recession and follows improved industrial production data yesterday and better recent house market signals. The data in itself is not conclusive proof of an exit from recession but it has certainly helped sterling to move higher. The pound has hit a new 2009 high of 1.1737 against the euro, it is trading above 1.64 on the dollar and is still holding its head above 160 against the Japanese Yen. Bank Of England member Andrew Sentance also opined that Britain’s economy is on track to return to growth later this year. Personally I feel the optimism is overcooked and could lead to another false dawn for sterling but it is refreshing to hear some postitive soundbites following months of doom and gloom!

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The markets have demonstrated conflicting trading signals on the USD- following last weeks rally back below 1.60 against the pound and to 1.38 against the euro we have now seen a reversal. The dollar was buoyed at the close of last week with improved non-farm payroll data increasing confidence in the greenback and political concerns further helping the USD gains against sterling. Outlook in the US was again helped yesterday with regards to the repaying of TARP by the 10 large American institutions but the dollar weakened yesterday and followed its regular trend of being sold on risk appetite. The key data in the US today will focus on the trade balance and the Fed Beige book. The trade balance is expected to widen in the US due to higher petroleum prices and the beige book is expected to confirm that the pace of economic contraction has slowed and the housing market is continuing to stabilize…we will see how the data affects the dollar this afternoon. I feel the dollar should come under future pressure due to recent fiscal policy and growing debt…this will discourage buying USD as a safe haven and it will be increasingly sold as recovery in the global markets improves. Cable is now looking to target a move to 1.65 and EUR/USD has moved back above 1.40 to 1.41 currently- with a rumour of Goldman’s going long on EUR/USD and targeting 1.45.

Sterling was helped with better output data than expected this morning with Industrial production coming in at +0.3% against a forecast of -0.1%, however the trade deficit widened to -£7.003bn against a forecast of -£6.5bn- this has not dented sterling too much and it has held firm against the majors. One key move is GBP/YEN is now trading back over 160.00 a good indicator of overall confidence permeating the markets.

Australia had a good number in the form of a key measure of consumer confidence posting its biggest monthly rise in 22 years- this has helped the AUD strengthen against the pound and the dollar and yen. The Aussie remains a firm favourite in yield and risk based trades from lower yielding/safe haven currencies. Other key data today is the interest rate decision from New Zealand- currently rates sit at 2.50% and a cut could be on the cards…