The currency blog

It’s a big week for the currency markets with a host of events that will most certainly add to the already volatile conditions that we saw in January.

The Euro has continued to slide against the Dollar over the weekend as concerns that Greece’s budget problems may spread continue to weigh on the single currency. Recent data from the Commodity Futures Trading Commission has shown that bets on a further decline now stand at the highest level in over a year. A strong Q4 US GDP figure (and subsequent stock market gains) on Friday further supported the dollar positive sentiment and helped the greenback reach a four-month high against the Swiss franc and a three-week high against sterling as signs the world’s largest economy is gaining momentum spurred investors to buy U.S. assets. Reports due later today are also expected to show that show U.S. manufacturing expanded for a sixth month and household purchases rose.

In the UK, attention this week will focus squarely on the Bank of England’s policy decision on Thursday and what this will mean for the future of the asset-purchase facility. With the property market showing signs of strengthening and the economy exiting recession, the MPC may move towards pausing it’s emergency bond purchases after buying 200 billion pounds so far.UK data earlier this morning showed that house prices rose for a sixth month in January as a shortage of homes for sale supported property values. However, prices were still down 0.8% from a year earlier.

The Australian dollar has traded near its lowest in more than a month as speculation on the strength of the nascent global economic recovery prompted traders to pare expectations of an interest-rate increase when the central bank meets tomorrow. Australian house prices rose at their fastest pace in six years in the last quarter as historically low mortgage rates and tax breaks stoked demand in a tight market, prompting an expectation that they will hike rates from 3.75% to 4.00% this week. However, the odds of such a hike have fallen to 71 percent from 78 percent in recent days. The New Zealand’s Dollar has also fallen to its lowest level since Dec. 23 after an index of commodity export growth slowed in January.

And to top it off on Friday we have the US jobless number. This piece of data is contentious to say the least always subject to revisions. However this time it may be that the number of unemployed Americans over the past 18 months is greater than at first thought. It is estimated that an extra 1 million Americans are unemployed but this has been hidden by the fact that they have either been on training courses or embarked on further higher education. A high percentage of these will be under 30 and will now be seeking employment. This is a worrying theme that could further slow any recovery and ultimately become a negative for the US $

Discuss on this on the Currency Exchange Forum