The currency blog

Risk appetite took a step backwards and the euro dipped but not a lot really and with Europe re-joining the fray (although not with any real commitment as yet) it doesn’t appear that sentiment re currencies, interest rates or sovereign debt issues has changed one iota.
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With US corporate results continuing to surprise on the positive side which in turn is fuelling increased risk appetite. The Dollar accordingly came under renewed pressure with investors again off-loading the Greenback to invest in equities and commodities as well as in the commodity based currencies. This latter strategy is especially attractive at present with these currencies currently offering a big pick up in yield when compared to that of the US currency. So, the Aussie reached a post-floatation high at 1.0775 and with the Dollar index hitting a 3-year low, both the Euro and Sterling touched 16-month highs at 1.4640 and 1.6517 respectively. Gold was up again and USD/CHF hit an all time low. One can argue that with ongoing developments in the Eurozone debt market and continued evidence of economic recovery in the US that the spot market has got it wrong but that would be a bit like King Canute trying to turn back the tide. Go with the flow but watch carefully for the turn in sentiment.
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The Bank of England minutes, released today showed that the MPC has not come any closer to raising rates. The vote as expected showed the split remaining at 6-3, with Spencer Dale & Martin Weale voting for a 25 basis point rise and Andrew Sentance for a 50 point rise. Data this month has shown the economic recovery stalling somewhat, and the surprise drop inflation (although probably temporary) should be enough to postpone any rise in interest rates.  The Pound is being pushed around by the Euro-Dollar pair, which has rebounded from the lows yesterday after strong earnings from IBM, Intel and Yahoo boosted risk appetite in the Asian session.
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Standard & Poor’s cut the outlook on US sovereign debt for the first time ever from stable to negative although retaining the current ratings at their highest possible levels of AAA and A-1+. The adjustment was explained as being a warning to the US that its constantly swelling debt pile was unsustainable and that corrective measures would need to be introduced immediately. The negative outlook implies that if nothing changes in the next 2 - 2 1/2 years, then an actual downgrade has a 1 in 3 chance of being triggered. It is by no means certain that this will occur, but should shake up opposing US politicians enough to start the remedial action moving forward. Suffice to say, the announcement provoked a flight from risk. Equities fell, bond yields rose, commodities came off and with them, the commodity based currencies such as the AUD and CAD. Gold and silver both rose, as did the Swiss Franc and oddly, the US Dollar. The news is now old and largely irrelevant to today’s trading so we are back to the factors that were affecting the market yesterday morning - Eurozone debt issues, the Libyan situation and Chinese economic policy.
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March wasn’t the best month for CD yielding 5 points from 4 games. This left us down in 3^rd place, needing to up our game drastically to keep pace. With 5 teams challenging now for the league supposed ‘6 pointers’ like will be coming thick and fast!

This week saw CD take on current league leaders and free scoring Mines a Pint FC. From the get go there was one team that dominated; fortunately that would be CD. Some patient build up created several chances but once again we found ourselves up against a keeper equal to the task. Whenever he was beaten the woodwork would come to their rescue. Despite this pressure Mines a Pint were not to roll over and a tidy breakaway allowed their forward to steal in and finish past Cat Cosgrave.

The second half led to further CD domination but again their keeper left us scoreless. Pressure was to finally tell with Merrick, Partridge and Watson combining twice in quick succession to reverse the score line and give CD the lead. Merrick and Watson providing the finishes both lifting the ball over the keeper with precision.

With their keeper lapping up the fact he was already crowned man of the match, some of his next saves were near on showboating as he tipped shot after shot away from danger. This left the game tighter than Jack Entwistle’s jacket but some sterling resistance and phenomenal work rate allowed CD to see things through and thus return to the summit of the table.

By Chris Partridge

A report this morning suggests the Bank of England risks pushing inflation higher if it looks towards a rate rise over coming months. The Ernst & Young Item Club suggest higher rates would push up mortgage costs and increase the RPI measure of inflation which is commonly used in wage settlements. E&Y think the Bank risks starting a wage-price spiral if they raise rates, as employers are put under increasing pressure to increase wages as inflation rises. The Bank also releases minutes from the last meeting on Wednesday. The markets are looking for another MPC member to join Dale, Weale and Sentance in voting for a rate increase. Although unlikely, if the vote shows 5-4 Sterling will rise as traders build in the prospect of a rate increase as early as next month.
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