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Dollar Up On Increased Risk Aversion In The Markets

The pound is mixed this morning, dropping against the broadly stronger dollar, but gaining against the euro after overnight report showed that UK consumer confidence rose for the first time in four months in September. Gfk NOP index of consumer confidence improved by 1 point from August to –30. Gfk said that while the increase is not statistically significant, it is “psychologically important” as it halts a recent decline in sentiment. However, sterling gains were limited against the US dollar as Asian stocks dropped, spurring demand for safer assets. Expect for the pound to remain driven by market risk aversion as there are no data releases or policy speeches scheduled for today.  

Euro dropped against most of its major rivals during early morning session after German retail sales figures fell by more than economists forecast. German gauge slumped to –2.9% in August after rising by 0.3% in July, missing the expectations of a –0.5% decline. Signs that the Eurozone debt crisis is hurting the region’s economic recovery have prompted speculations that the European Central Bank may be lowering the borrowing costs at their monthly meeting next week.  Looking ahead to today, Eurozone’s Unemployment and CPI estimate headlines the economic calendar. 

The dollar gained across the board during the Asian session on concerns that global economy is faltering, boosting demand for the so-called “safe haven” currencies. Additional evidence to the weakening global economy was provided today when Chinese manufacturing shrank for a third month, the longest contraction since 2009. On the US data front, University of Michigan Confidence report headlines the economic calendar, with the expectations for the figures to remain unchanged at 57.8 in September. Expect for the dollar to remain in current ranges as global outlook is not looking promising.

Pound Remains Under Pressure On Prospects Of Additional QE

The pound is little changed against its major rivals this morning, but remains undermined on speculation the BoE will expand its quantitative easing programme in near future. Bank of England official David Miles signaled today that he may be leaning toward voting for additional asset purchases to support the economic recovery. Economic growth in Britain slowed in the second quarter and recent indicators of consumer confidence, manufacturing and services have all weakened. The central bank bought 200 billion pounds of bonds in a program that ended in the early 2010. Some analyst believe that BoE may resume with its QE programme as early as the October 6 decision, and already speculate with the amount the central bank will inject in the system. Separately, Nat’wide House prices came out slightly better than expected in September, increasing by 0.1% on monthly basis. However, Nationwide reported that recent events in financial markets and the worsening economic outlook are likely to dent buyers sentiment and could depress prices further. Looking ahead to today, lending to individuals and mortgage approvals data for August highlights the economic calendar. The market consensus for mortgage approvals is expected to have risen to 49.7K from 49.2K and net mortgage lending to have been 0.8 billion, up from 0.7 billion in July. Expect for the pound to remain under pressure against its major rivals on increased prospects the central bank will expand financial stimulus.     

The euro rose across the board during the overnight trade on speculation German lawmakers will approve the expansion of the bailout fund to help to contain the sovereign debt crisis in the Eurozone. The single currency gained against the dollar as German Chancellor Angela Merkel attempted to win the backing of her coalition to expand the powers of the European Financial Stability Facility(EFSF). The changes on the EFSF would allow the fund to buy bonds of debt stricken member states and offer emergency loans to governments, increasing the Germany’s guaranties to 211 billion euros from 123 billion euros. Expect for the single currency to remain supported on the short to medium term as it looks like the solution to debt troubles in the euro region start to take basic shape.     

Pound Mixed as EUR Steadies itself, USD lower

The pound is mostly flat this morning, although it fell slightly against the EUR and has come off the recent lows against the USD.  The EUR has slightly steadied it self against the pound and dollar as sentiment surrounding the single area currency seems to be improving and market hopes that EU officials will arrive at a resolution to the region’s sovereign debt issues.  Sterling gained against the dollar off its lows even as yesterday’s UK shop sales data declined this month to the lowest level since May 2010.  However, despite the steadying levels against the EUR and gains against the USD, the pound will likely remain under downward pressure as the market is expecting more quantitative easing from the UK.  This morning David Miles, a member of the monetary policy committee, said that he was increasingly in favour of voting for more QE as he sees it an effective measure to boost the economy.  He said that, “I think we do on the MPC have substantial ammunition to use if we need to”, alluding to the bank’s option to effect more QE as soon as the next meeting.  With no data of note out in the UK today, expect the pound to remain in ranges and to trade in response to market sentiment and developments on the continent and across the pond

Pound Gains Versus Euro On Eurozone’s Debt Crisis Concerns

The pound is mixed this morning, consolidating against the broadly stronger dollar, but gaining against the euro on worries European officials are having hard time to resolve the debt crisis. Sterling was also supported against most of its major rivals during Asian session as investors perceive the UK currency as a “safe haven” given the current fiscal picture in developed economies. There are no economic releases or policy speeches scheduled for today. Looking to the weak ahead, GfK Consumer Confidance survey headline the economic calendar, with the expectations for the figures to slide further to –33 in September. Also scheduled for this week is the CBI distributive sales survey on Tuesday, while on Thursday we will see the publication of money and credit data for August. However, expect for the pound to remain driven by the events on the continent as debt crisis in the single region deepens.  

The euro dropped across the board during the overnight trade, reaching a ten year low against the yen as Greece awaits decision on its next round of emergency loans. Eurozone policymakers will not be in a position to decide on the next round of rescue for Greece when they meet on October 3 as the report from the IMF , ECB and European Commission has been delayed. The 440 billion euro from the EFSF (European Financial Stability Facility) which were in place since July 21 meeting, will take effect only when all euro area countries have ratified them. Looking to the economic docket for the Eurozone today, German business sentiment headlines the calendar, with the expectations for the September figures to have decreased to 106.5 from 108.7 in previous month. Turning to the weak ahead, German unemployment figures and Eurozone Consumer Confidence data are all published on Thursday. Expect for the single currency to remain under pressure against its peers as Greece is at the verge of the unregulated default and Eurozone’s economic recovery is faltering.

The dollar is higher against most of its rivals as investors around the globe run for safety of the US currency while Eurozone’s debt crisis intensifies and value of the global stocks have been whipped out during market turmoil. However, the greenback will be put to the test this week before the third reading of gross domestic product (GDP) for the second quarter is released on Thursday. The gauge is projected to be revised upwards from 1.0% to 1.2%, reflecting increased levels of construction spending. Also scheduled for this week will be the release of S&P/CaseShiller Home Price index for July, with the expectations for the figures to rise 0.5% from June.  Finally, Durable goods orders for August are expected to provide some downward pressure on Wednesday, with overall reading expected to have decreased by -0.5% in August.  

Euro Gains As G-20 Pledges To Support Global Economy

The pound stabilized against the so-called “safe haven” currencies during the overnight trade after the Group of 20 nations pledged that they are committed to a “strong and coordinated” response to challenges facing the global economy. The G-20 nations policymakers stated that they are ready to tackle the challenges facing the economy, particularly from increased downside risks from “sovereign crisis, financial fragility, weak economic growth and unacceptably high unemployment”. There are no major releases or policy speeches scheduled for today, with only noticeable release being the BBA Loans for House Purchases.

The euro rebounded against the dollar and the yen during the Asian session as market risk aversion faded and stocks managed to regain some ground after G-20 nation’s pledged to tackle the problems facing the global economy. However, single currency gains were limited as Eurozone services and manufacturing data shrank for the first time this year adding to the signs of faltering economic recovery. Separately, Moody’s Investors Service downgraded the long-term deposit and senior debt ratings of eight Greek banks by two levels. As Greek banks hold the majority of government bonds analysts speculate that they will lose the collateral needed to borrow from the ECB and are likely to get nationalized. In addition, European Central Bank Governing Council member Klass Knot said yesterday that he no longer excludes Greek default. Market participants now expect for the European Central Bank to react as soon as next month should the economic data disappoint further. 

Dollar Gains After Fed's Announcement

The pound dropped against most of its rivals this morning, especially against the US dollar after the Federal Reserve said it would take steps to boost the growth in the world’s largest economy. The Fed late yesterday said it will rebalance its Treasury holdings to cut longer-term borrowing costs. Sterling also came under pressure yesterday after Bank of England officials said they may need to buy more bonds in order to keep the borrowing costs at current level as economic recovery falters. A weakening global economy and the threat from Europe’s debt crisis have shifted policymakers attention away from inflation risks to avoiding a slide back into recession. Minutes from the September meeting revealed that MPC now see second half growth being considerably weaker than previously expected. Looking ahead to today, the September CBI industrial trends survey is published today at 11, with the expectations for the headline total orders number to fall back to –5 in August. Expect for the pound to remain under pressure on short/medium term as the Bank of England moves closer to policy loosening. 

The euro is mixed this morning, remaining flat against the pound, but dropping against the broadly stronger dollar as Federal Reserve decided to intervene in financial markets in order to support fragile economic growth. The single currency still remains under pressure as debt crisis within the region continues to trouble the investors as well as the policymakers. Looking ahead to today Eurozone PMI Manufacturing figures headline the economic calendar, with the expectations for the figures to have declined further in September.   

The dollar gained across the board during the overnight trade after Federal Reserve decided to take additional actions in order to keep the economy from sliding into another recession. The central bank will extend the average maturities of its existing Treasuries by purchasing 400 billion dollars of long-term debt while selling an equal amount of shorter-term securities. After the Fed’s announcement the stock markets around the globe tumbled the most in a month. Analysts believe that Fed’s action will support the overall US economy but are not convinced that’s enough to get the recovery back on track. Looking ahead to today, the index of US leading indictors headlines the economic calendar. The Conference Board gauge of the outlook for the next tree to six months is expected to have climbed only by 0.1% in August, after rising 0.5% in July. Also scheduled for today is the initial jobless claims for last week, with the expectations for the figures to have dropped for the first time since mid August.  

Dollar Gains Before Fed Announcement

The pound remains eight month low against the dollar before the Bank of England releases the minutes of the September meeting today at 9:30. Market participants expect an unchanged 9-0 vote to hold Bank rate at 0.5% as the slowing economic recovery outweighed the prospect of rising prices. The main focus will be to see if the MPC have maintained its 8-1 stance for keeping the Bank’s QE program at 200 billion pounds, or if there were some committee members who joined Adam Posen in voting for an increase of quantitative easing. Also scheduled for today is the public finance data, with the expectations for the Public Sector Net Borrowing (PSNB) to have been 11.5 billion in August while public finances are expected to reach 7.0 billion for the same period. Sterling’s sentiment was dented during the overnight trade after Nationwide report showed that UK consumer confidence fell to 48 in August, from 49 in July. Expect for the pound to weaken against its peers should we see the BoE officials leaning towards additional fiscal stimulus.  

The dollar gained across the board during the overnight trade on speculation the Federal Reserve may announce today a further stimulus measures after its two-day meeting. Analysts are expecting the Fed to expand its monetary stimulus to lower the cost of long-term mortgages in order to support the rebound in US housing market. Therefore, it is broadly expected for the Fed to leave its benchmark rate unchanged at 0.25%. Also scheduled for today are US housing figures, with the expectations for the existing home sales in August to have increased by 1.7% after dropping –3.5% in the previous month. Separately, investors around the globe are running for the safety of the US currency as global economy is showing further signs of slowdown. The IMF said yesterday the world economy will expand 4% in next two years, compared with June forecast of 4.3% in 2011 and 4.5% in 2012. The IMF predicted that developed nations will grow 1.6% instead of 2.2% while the developing economies will experience 6.4% growth, down from 6.6%.

Euro Drops As S&P Downgrades Italy

The pound is mixed this morning, remaining firm against the broadly weaker euro, but consolidating slightly against the dollar as Asian stocks declined on increased risk aversion in the markets. The MSCI World index dropped during the overnight trade as uncertainties over the European debt pushed investors into the safety of the US dollar. Sterling sentiment was dented after Bank of England released its Quarterly Bulletin stating that 200-bilion pounds asset purchase program was very effective, indicating that they are considering using this option again in the future. In addition, business secretary Vince Cable warned that UK economy could face second wave of financial crisis or face a lot of years of stagnation in the future if the European Debt problems continue to burden already fragile economic growth. Expect for the pound to remain driven by market risk aversion as there are no data release or policy speeches scheduled for today.

The euro dropped across the board during the overnight trade after S&P rating agency downgraded Italian sovereign rating. The single currency continued with its downtrend after S&P cut Italy’s rating by one notch to A from A+, citing weaker economic growth outlook. The rating company also stated that Italian net general government debt is the highest among it’s A rated countries, and is expected to reach levels higher than previously expected. Separately, Greek PM George Papandreou will hold another call with EU and IMF tonight in a bid to secure a sixth installment of rescue funds in order for the government to meet its deficit goals. Looking ahead to today, German ZEW Survey of investor sentiment headline the economic calendar, with the expectations for the figures to deteriorate further in September. Expect for the single currency to remain under pressure as Greek default is on sight and as Italy debt troubles start to worry investors.  

Pound Rises as EUR Remains Under Pressure

The pound rose against the broadly weaker EUR but fell against the USD to start the week.  Sterling pushed higher against the single area currency this morning as a report showed that UK house prices jumped on September with investor seemingly looking for safer assets amid the turmoil in financial markets.  However, the majority of sterling’s strength against the single area currency, which is widely under pressure, stems from the fact that EU leaders appear to have failed to offer a plan which would demonstrate how they will halt the region’s debt crisis and as Greece is on the brink of default.  Today EU and IMF officials will meet with Greek Finance Minister Evangelos Venizelos to assess whether or not Greece is eligible for its next aid payment.  The pound is lower against the broadly stronger USD, as risk aversion attributed to the uncertainty in the financial markets has prompted investors to flock to the greenback, as Swiss Franc and Japanese Yen have widely been disused as safe haven currencies as of late due to central bank interventions.  Additionally, the pound is lower against the USD as this week’s Bank of England meeting minutes may open doors for more quantitative easing in the near term.  The Fed also meets this week for its monthly two-day meeting which is scheduled to commence today.  

 

Pound Lower on ECB Liquidity Action

The pound is lower against EUR and USD, as the European Central Bank announced last night that it would engage in coordinated liquidity funding operations with other central banks (the Fed, Swiss National Bank, Bank of Japan) in order to ease dollar based funding for European banks, thus dampening concern about the European banking sector.  This news came on the back of fresh support for Greece by German and French officials and the market perceived the news as euro positive and as an indication that the Eurozone leaders may be on the path to solving the sovereign debt issues in the single currency area.  With no data out in the UK today, expect the pound to trade in response to developments on the continent.  The dollar is remaining higher against the pound as risk aversion is prompting investors to flock to the perceived safe haven of the USD as concerns regarding economic recovery in the UK are still very much on their minds.  Next week’s Bank of England minutes release is crucial for the pound in terms of economic event risk, as the market will look for indications for any further quantitative easing in the near term.