The currency blog

There were no surprises yesterday as Bank of England minutes indicated the Monetary Policy Committee voted unanimously to keep interest rates at 0.50% and to maintain Quantitative Easing at GBP 200bn. The committee however, did make reference to the pressing issue of inflationary problems evident in recent higher than expected CPI figures.

Sterling was boosted yesterday against the Euro and the Dollar by the news that the number of people claiming jobless benefit fell by 32.9k in March, after a revised fall of 40.1k in February. This news coupled with the heavy EUR/GBP selling this week appears to be having a positive impact on GBP/USD.
Read the rest of this entry »

The results from Goldman Sachs shocked the markets as revenues for the 1st Quarter was $ 1 billion more than estimated. The Greek situation went from bad to worse yesterday with market talk of ever-upwardly spiralling bail-out costs leading to a rise in the country’s debt yields and CDS prices. The 10-year bond yield broke above 8% for the first time since the Euro’s introduction yesterday and the 5-year CDS level has hit a new high of 476 this morning. With today’s belated start to the IMF/EU investigation likely to last anywhere from 10 - 14 days, there appears little likelihood of positive news over the next few days. True, Greece managed to get away a tranche of 3-month bills into the market but this positive was tempered by the rate that they needed to pay to ensure success - approximately 2 1/2% higher than an equivalent German issue would cost. The Euro has accordingly looked vulnerable, especially given that the US Dollar no longer appears to react negatively to positive economic/earnings data from the US. Expect more Euro downside as we approach the end of the month.
Read the rest of this entry »

With the Volcanic ash cloud causing the postponement of Greek officials planned meeting with the IMF yesterday, the Hellenic Republic will be back in the spotlight with a planned 3 month Treasury bill auction today. Spreads between German and Greek bonds reached a Euro lifetime high on Monday, pushing Greece’s borrowing costs higher and prompting comments from Financier George Soros that Greece may face falling into a “death spiral” of recession and falling government revenues unless their borrowing costs start to fall.
Read the rest of this entry »

Nick Clegg’s strong performance at last weeks televised election debate has seen the smallest of the three parties surge into an unlikely lead in the polls. The You Gov election poll placed the Lib Dem’s on 33% with the Conservatives and Labour on 32% and 26% respectively. This has greatly increased the possibility of a hung parliament and has given traders an excuse to sell the pound. Since the Australian open we have seen GBP/USD fall from 1.5351 to a latest reading of 1.5222.
Read the rest of this entry »

Greek Prime Minister George Papandreou yesterday asked for a meeting with the European Union, the IMF and the ECB, leading to speculation that a bailout is imminent. Talks are to begin in Athens on 19th April. The country’s cost of borrowing from private markets continued to rise, with the yield on Greece’s benchmark 10 year government bond surging to as high as 7.38% yesterday. Financial markets have shunned Greek debt in recent weeks, despite escalating promises from the EU that they would step in to prevent a default. The euro was the worst performing major currency on these renewed fiscal worries. Read the rest of this entry »

The risk-on trade was the order of the day yesterday and overnight in Asian trading as Sterling pushed over 1.55 against the USD and 144 against the Yen. Stellar reported earnings yesterday from JP Morgan Chase and Intel sent stocks on both sides of the Atlantic higher, with both the FTSE and S&P 500 hitting levels not seen for well over a year. Above forecast retail sales figures and CPI data helped the Dollar gain against the Euro along with the closely watch testimony from Fed Chairman Ben Bernanke. Mr Bernanke did stray far from the Feds perceived dovish stance, but he did say that the FED expects the US to recover at a moderate pace, with the housing sector still a particular concern.
Read the rest of this entry »