The currency blog

The Bank of England left interest rates on hold at 0.5% but in a surprise move they increased the QE programme by £50 billion. This immediately caused a sharp drop in sterling across the markets losing about 1% against the USD and the EUR. The move can be described as aggressive and ultimately cautious at the same time; aggressive in relation to instilling the liquidity to revive a strong recovery and cautious in the sense that recent positives have not swayed the BoE into taking a recovery for granted. Next week we have the quarterly inflation report from the Bank of England and this will be interesting as the extra QE measures will be extra inflationary- will the report make a view on this? The move by the bank clearly indicates that deflation remains a concern coupled with tight lending and credit conditions. Expect the pound to come under pressure as a cautious note will surround the pound ahead of next week’s inflation report.

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Despite having 5 Dress Down Fridays, the month of July has sped past already and all the golden coins have been counted and verified. The new rolling total on the co-operative wall is £1843. Congratulations to everyone who has contributed again. Although the total this month is lower than we have been used to, we really are doing very well and we have been able to help a lot of charities.

The break down for July’s collections are:

Hwange Conservation Society - £96.71
British Red Cross - £72.62
RNID - £72.71

The two tubs that people had put loose change in for The Food Chain were collected in July and we had collected £35.35 which has also been added to the total. There are now tubs for The Childrens Trust by the co-operative wall if you have any spare change burning a hole in your pocket.

All four worthy causes are delighted that we have been able to help them and we are already getting some ideas together to support the next three charities in August which are:

Parkinsons Disease Society
NSPCC
Survival International

As always, if you have any ideas for fundraising or charities that you would like to support please do send them across to the CSR Team.

Names are already being taken for a new Wii Tournament, don’t forget to get your names down! Jose is already boasting about lifting another trophy!

Thank you for reading, and keep donating!

The winner of the Currencies Direct Wii Tennis Championship 2009 Jose Ivars-Lopez graciously shakes hands with Imran Khan while accepting his winners trophey.

Jose has already signed up for the next Currencies Direct Challenge Cup - the Wii Bowling Championship, as has arch-rval Jarrad. Watch this space for more information on who will be playing who!

That is will the Bank Of England extend the current measures in place for Quantitative Easing? It will be a mighty close call and will be a defining juncture for the UK’s monetary policy sentiment. On the one hand the economy is still fragile objectively and lending certainly has improved- in July the measure of money supply fell by the most this year and lending to companies has fallen for three months in a row. On the other economic data in the last week could sway a decision to hold and adopt a wait and see approach- the problem with this is that if they hold now and start again later then it will not look very good. QE already introduced will not have had much effect in the markets as it will take time to filter through. For the currency markets the repercussions should be very clear- an increase in QE will lead to selling pressure in sterling and no change could push us beyond 1.70 against the USD and 1.18 against the EUR.
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Mostly sideways trading yesterday as sterling and the euro failed to advance further against the USD. We did see a test of the key 1.70 level but if you blinked you may have missed it. US equity markets also struggled to find a direction swinging between gains and losses with the Dow Jones finally ending slightly up. A pause is probably sensible now as news may materialize that the optimism is not warranted and the overheated markets will quickly retreat. We have a three-pronged event risk this week as we have the monthly BoE and ECB meetings on Thursday and also the payrolls report on Friday from the US. It seems the market will await further direction from these event risks.

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The pound rediscovered its former glory yesterday but will it last? This morning we have tested the much feted 1.70 level but quickly retreated. We have witnessed a few false dawns in the past for the pound and the Bank Of England decision on Friday will be in the back of the mind for sterling bulls. On Thursday the Bank Of England may announce a further expansion on the quantitative easing programme by £25 billion which will be sterling negative. On the other hand they may decide to leave it be and this could help sterling push over the 1.70 level and advance against other major currencies such as the euro and the Yen.
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