Foreign exchange and currency rates blog

Sterling lifted in early trading

Keith Spitalnick — Thu, 11 Mar 2010 11:55:04 +0000

Yesterday the Pound affirmed its status of being the current whipping-boy currency following the disappointing manufacturing and industrial production numbers yesterday morning. Given the much worse than expected trade figures from Tuesday, economic pundits had marked down their assumptions for yesterday’s data but the outcome proved even less palatable. Given the lack of anything more relevant, Sterling was sharply sold off, touching a low of 1.4870 against the Dollar and dipping down to 1.0950 versus the Euro. Today the pound has managed to forge a move back over 1.10 (just) and 1.50…news that a Bank of England survey expects inflation to rise for the year ahead has helped. The market again needs to target 1.52 on the USD and sustain over 1.10 against the euro before we can look at sterling pushing higher. Still a lot of negatives in sterling so I am not that bullish on todays move.

Yesterday we had the result of the RBNZ monetary policy meeting at which, as had been expected, they left the Kiwi interest rates unchanged at 2.5%. The Governor, in his statement that followed, reiterated previous guidance that it would not be until about the middle of the year that the Bank expected to start removing its policy stimulus measures ie tightening rates and withdrawing liquidity. This leaves the Dollar exposed to further losses against its Australian neighbour, who appear to be well on the way to additional tightening measures.

And the hits keep on coming

Keith Spitalnick — Wed, 10 Mar 2010 16:41:42 +0000

That is for sterling and the UK economy as Industrial production for January and manufacturing output came out much weaker than expected. Industrial output was -0.4% month on month and manufacturing output was -0.9%. Thus we have more negative feedback on top of yesterdays negatives to further reinforce the selling pressure on sterling. Gordon Brown was also speaking this morning on the UK economy; he affirmed that the recovery is in the early stages and remains fragile. There will be a budget in 2 weeks time which will set out more detail on deficit reduction- certainly needs to. As we have discussed sterling needs some clarity and so do the credit rating agencies.

Sterling is still under the 1.50 level against the USD and has dropped under the 1.10 level against the euro and is entrenched in a bearish trend.

Virtually nothing in respect of economic data ahead for today, however we will have comments from Central Bank members from the ECB & US. Tomorrow we have US jobless claims and Friday EU Industrial Production.

Sterling sold off again

Keith Spitalnick — Tue, 09 Mar 2010 13:37:36 +0000

The consolidation period for Sterling did not last too long and overnight in Asian trading and so far this morning it has been under selling pressure again. The reason for the fall today has again been attributed to narrowing polls showing that Labour and conservatives are “neck and neck”. In addition credit rating agency Fitch has stated that the UK sovereign credit profile has deteriorated and Moody’s has warned that some UK banks could face downgrades. To top it off we have received poor economic data with UK RICS house price balance coming in weaker than expected and the UK January trade balance was also weaker than anticipated. The pound has crashed back through the 1.50 level against the USD and is testing the 1.10 level on the euro.

Elsewhere the euro has come under some pressure too against the USD and the JPY. Although the Greece situation is becoming yesterdays news, there are a number of other economies to replace Greece such as Portugal and Italy for starters. Expect the euro to remain under pressure for the foreseeable future.

The NZD has been choppy ahead of their interest rate announcement on Thursday morning. The expectation is that the RBNZ will keep rates on hold, however it seems some doubt has crept in and is causing volatility in the NZD crosses.

Not too much on the economic calendar for the rest of today- same story with sterling as last week in that it needs to get back above 1.50 and preferably 1.52 against the USD to forge a move higher.

Sterling holds firm

Keith Spitalnick — Mon, 08 Mar 2010 12:15:17 +0000

Sterling has started the week above 1.51 against the USD and over 1.10 against the euro as it looks to continue consolidating after suffering heavy losses last week. Sterling was cushioned by improvements in consumer confidence and UK PMI which showed gains in the UK service sector. The FTSE also climbed to an 18 month closing high on Friday and pushed over 5600 this morning before falling back a little. The recent economic data from the UK and the not so bad non-farm payrolls is helping to allay fears of a double dip recession- could this lead to further rallies in the equity markets? If so we can expect to see the return to confidence accompanied by selling pressure on the USD and the JPY, some gains in the GBP and EUR and more broadly in the commodity currencies such as the AUD, ZAR and CAD.

The markets are also breathing easier on the Greece situation with the new austerity measures viewed favourably by the markets. The over subscription of the bond sale on Thursday was a welcome relief; in addition comments from French President Sarkozy stating “If Greece needs help, we will be there” also helped calm fears. It would be astonishing if the EU sat by and let Greece default but the theme at the moment is for Greece to look tackle their own problems- this is also the stance of the Greek PM. The EU are also ready to propose a European Monetary Fund to build capital for scenarios like Greece. The euro has gained a little against the USD on the improved outlook but is struggling to push above 1.37. Economic data from Germany today will not be helping the euro as January Industrial Production came in weaker than expected.

Currencies Direct Chilli Charity Challenge

Sara — Mon, 08 Mar 2010 08:08:19 +0000

Currencies Direct Chilli Charity Challenge

Deepak Goyal brought the ‘hottest sauce in the Universe’ into the office and laid down a challenge - who could eat the most!

Obviously, there was a charity angle to the proceedings as is always the case with Currencies Direct so the brave contenders all paid £3 each to enter the competition with all money being donated to charity as Deepak was stumping up the £20 prize fund from his own pocket - hurrah!

The rules were simple:

Contestants all compete at the same time in rounds.
Each round will consist of one drop of sauce on a dorito that the contestants must eat and then not take a drink for 30 seconds.
All those lasting for 30 seconds pass through to the next round.
All contestants may take a drink between rounds should they wish.
The drops of sauce will increase at a rate of 1 per round, so round 2 has 2 drops, round 3 has 3 drops etc etc etc.
The competition stops when there is only one person left.

We started with 10 participants, these were:

Natalie Lewis
Courtney Baisch
Marco Sabba
Dan Cousins
Deepak Goyal
Imran Khan
Jose Ivars Lopez
Daniel De Souza
Mark O’Sullivan
Craig Montano

But we lost Mark O’Sullivan and Jose Ivars-Lopez before the competition even began, so just 8 took up the challenge!

There were smiles from everyone at the beginning……..

But these soon started to diminish…..

And there was a lot of brow mopping!

Until there were only two left! Measurement of the ‘hot sauce’ was precise for the final round where a dessert spoon each of sauce was needed!

Courtney and Craig were both ready for the sauce!

Both were impressive and it was clear neither was going to back down! The event was declared a draw, and Courtney and Craig shared the prize fund.

Well done to everyone that took part - you are all soooo much braver than I am and we raised an extra £40 for charity - double hurrah!

No surprises from the BoE

Keith Spitalnick — Fri, 05 Mar 2010 12:58:31 +0000

Yesterday it was announced that the BoE were keeping interest rates on hold at 0.5% and the asset purchase programme was held at £200 billion. The stronger PMI data this week and the improvement in the revision of Q4 2009 GDP has helped the MPC to be comfortable in their current wait and see policy. An article in the Telegraph interestingly pointed out that if it was not for QE the UK would still be in recession- could well be the case. The fact that there was no expansion helped to keep sterling supported just over 1.50 against the USD and 1.10 the EUR- we really need to see a move beyond 1.52 before we can start to relax a little.

Over to the ECB and as expected they also kept rates on hold at 1%. They announced that it will continue to scale back their special lending measures as expected and equally as expected Trichet dodged the difficult bullets concerning Greece and gave little away. Yesterdays Greek bond issue was a real success and this gave the markets a boost backing up the recent austerity measures introduced- the market is aware that we are not out of the woods but this certainly helps. Expect further wranglings with Greece but nice to get some good news for a change; today the German and Greek heads are meeting. Should be a spicy meeting after yesterdays comment from the German Economics Minister who said that the German government has no intention of offering Greece “even one cent” and that each country has to take care of its own affairs…..would be nice to be a fly on the wall for this meeting.

Later today we have the big US non-farm payrolls number but even this has lost some of its importance with the appalling weather expected to have considerably distorted the numbers. In a way this could prove to be Dollar positive with the whole community expecting a weak number therefore reaction should only materialise from a surprisingly better result.

February Donating - How did we do?

Sara — Thu, 04 Mar 2010 14:48:06 +0000

The short month of February is over already and this month we went back to supporting 3 charities and showing our support via the gold coins!

We raised a very healthy £219.15 in February which has pushed the co-operative wall total up to £4966 - almost at the £5k mark. And this is a significant benchmarking moment as Currencies Direct employees have now been regularly supporting charities for 1 year. To almost reach £5000 in one year of contributing from an office of just 50 people is inspiring. I wax lyrical about the commitment and enthusiasm that has sprung from Currencies Direct to anyone outside this office that will listen. Its hard to believe that just 12 months ago we didn’t do anything, and now I can look at a wall of thank you letters from charities praising our good work and the help that the money raised has been to them!

Thank you to everyone who has helped make this a success, I am very proud.

So, which charity was your favourite in February. The breakdown is below:

Shelter £71.99
Streetchild £81.68
Mencap £65.48

So February was close, but Streetchild just came out on top. The co-operative wall has been updated with the new charities that we will be supporting in March and these are:

Help a London Child
Born Free Foundation
Epilepsy Research

As always, click back here for regular updates on the additional fundraising activies that we get up to!

Thank you for reading

BoE hold interest rates and QE

Jose Ivars — Thu, 04 Mar 2010 13:21:04 +0000

Today, the MPC voted to leave their rates unchanged and in addition held QE at £200 billion. The improved PMI data yesterday and the up tick in the revised Q4 GDP to 0.3% helped to reinforce this stance. Personally, I would be very surprised to see any change in monetary policy before the general election on rates or QE. However we have been surprised in the past by the BoE and we could be again; today the markets will be looking for any subtle changes in tome and sentiment on future monetary policy projections in the statement. The minutes in two weeks time will probably help to shed more light than todays decision from the BoE on future moves. Sterling has held firm after making gains yesterday against the USD and the JPY; Sterling was boosted by improvements in consumer confidence and PMI data and the austerity measures announced by Greece. The 1.50 rate on GBP/USD is still the psychological that the pound needs to hold above and build on.

The euro has managed to improve against the USD moving towards the 1.37 area. Greece announced yesterday its austerity package, including wage cuts, pension freezes and increases in VAT. Although these measures were widely anticipated the markets were comforted on the release and supportive comments by Jose Barroso, the president of the EU commission. The FX market likes clear and defined plans and the measures have helped to ease the fears and in addition raised hopes of more support from the EU. The measures are not going down too well with the Greek public and we have already seen the protestations on the severe measures. Portugal is also bracing itself for strikes on their austerity measures. We can expect this to be a common theme throughout Europe and post election in the UK as the public suffer to compensate for repaying bulging deficits.

Yesterday we also had good data from the US, with the Fed beige book highlighting an improvement in activity levels. We have the big one tomorrow in the US monthly non-farm payroll data giving more feedback on the health of the US labour market.

Sterling consolidates for now

Keith Spitalnick — Wed, 03 Mar 2010 15:40:14 +0000

Not much movement overall yesterday on Sterling as the markets paused on selling the pound. This morning we have in fact made some gains back and as we stand we are holding just above the key 1.10 level and 1.50 on GBP/USD. The 1.50 level on GBP/USD is a crucial level to hold above and will help to steady the ship and prevent further selling pressure. This morning we have seen UK PMI data come in much stronger than expected rising to 58.40 compared to the 55 expected and giving the best reading for over 3 years. On top of this consumer confidence rose to 80 and a 2 year high as consumers look ahead to a brighter 2010 for the UK economy. The good data this morning was a huge breath of fresh air for sterling giving it a welcome break from the selling momentum.

EUR/USD has picked up this morning beyond 1.36 following the leaked news of an austerity package for Greece totalling 4.8 billion euros. There is still uncertainty on the level of support that Greece will receive from the EU and the Greek PM tactically said that the cabinet may turn to the IMF if the EU does not give support- nice move…if we get further clarity on the level of EU support then this should lift the euro further. In addition it will help lead to selling pressure on USD and the JPY and hopefully boost the pound as confidence improves.

The Bank of Canada yesterday did everything apart from actually raising rates, thus cementing their previous comment that they preferred to wait until the summer before actually tightening officially. The CAD strengthened on the accompanying bullish statement and with the AUD, looks set to be a star performer, certainly for the 1st half of 2010.

Can sterling pick up the pieces?

Keith Spitalnick — Tue, 02 Mar 2010 13:00:56 +0000

After being sold aggressively across the markets yesterday the markets have taken a breather and we now await the next move. First let us dissect why the drop in sterling which fell over 2% against the USD pushing it to a 10 month low. Well the focus is political with the opinion polls over the weekend indicating that the chances of a hung parliament were much higher- so why does this cause a problem? A hung parliament may actually prove successful, however the markets do not like uncertainty and the consensus is that a coalition government will have less political clout to push through the decisive decisions especially in relation to tough fiscal planning which is inevitable.

The Conservatives have come out of the traps today stating that protecting the AAA status is central to their plans- however some feel their proposed aggressive cuts will be detrimental to recovery. On the other hand Labour propose to wait and cut later but waiting too long could mean that the horse has already bolted and the AAA rating could be lost. So this uncertainty and division is leading to a weaker pound. Yes this could be good for the UK economy and for recovery but there is a fine line between a weaker pound and the loss of confidence in Sterling and the UK economy- this would lead to a sharp rise in import prices and inflationary pressure especially if commodity prices remain high- not good; this would spill into a pressure on the UK gilt markets and inevitably the UK losing the AAA rating adding yet more pressure. So you can see the problem that uncertainty is creating. The pound needs to get back above the psychological 1.50 level against the USD. The Times summed up the weakness in the pound by empasizing its 7% since the beginning of February against the Zimbabwe Dollar!

Sterling also lost yesterday on the purchase by Prudential of AIG’s Asian business which led to further selling of GBP and buying of USD in the light of this purchase.

In other news the RBA raised interest rates by 25 basis points to 4%- giving further strength to the Aussie. The AUD still the darling of the currencies and expected to strengthen further against the major currencies going forward.