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Pound Drops Versus Dollar On Weak Housing Data

The pound is mixed this morning, gaining against the euro, but consolidating against the dollar after reports showed that UK house prices fell in October. The average cost of a UK home fell 0.2% from September and is down 2.8% from the previous year. Britain’s housing market is struggling to gain momentum as banks restrict lending, unemployment rises and inflation outpaces wage growth. Nevertheless, Sterling jumped against the yen during the overnight trade after Japanese government intervened the markets and started selling its currency. Scheduled for today is the BoE mortgage approvals report, with the expectations for the figures to drop to 50,600 in September from 52,410 in August. Looking to the week ahead, first reading of Q3 GDP (gross domestic product) data headlines the economic calendar, with expectations for the UK economy to grow 0.3% from previous quarter. UK economy is struggling to keep up with economic recovery as government imposes the biggest cuts in state spending since WWII. On Wednesday and Thursday we receive the remaining PMI’s for October, with expectations for the construction PMI to hold steady at 50.0 and the services PMI to fall back to 52.0 from 52.9. Expect for the pound to experience excessive volatility should we see the growth data surprising on the downside. 

The euro consolidated against its major rivals on speculation that rescue plan created by the EU leaders may fail to contain debt crisis as passive economic growth weakens the ability of countries to reduce their debt levels. EU leaders agreed on their latest meeting to increase the bailout fund to 1.00 trillion euros, recapitalize banks and write down Greek debt by 50%. However, some market participants believe that the plan is not going far enough, and bond yields of highly indebted nations like Italy and Spain will keep rising relative to German bonds. Looking ahead to this week, ECB’s interest rate decision on Thursday headlines the economic calendar, as it is the first meeting to be taken under Mr Mario Draghi’s presidency. Also scheduled for this week are the German and French PMI data and Eurozone producer prices index.    

The dollar gained across the board during the Asian session as investors run into the safety of the US currency after Japan government intervened in the markets for the third time this year. However, expect for the greenback to experience a lot of volatility as US jobs and industrial data are due to be released later this week. Analysts expect Friday’s release of the non-farm payrolls report to show creation of 95K jobs in October after generating 103K in the previous month. The overall unemployment rate is expected to remain unchanged at 9.1%. Also scheduled for this week is the Federal Reserve’s monetary policy announcement, with expectations for interest rates and the central bank’s stimulus measures to remain unchanged.    

Pound Falls As Consumer Confidance Declines To Lowest Since 2009

The pound dropped against its major rivals during the overnight trade after Gfk consumer confidence fell to its lowest level since 2008. The headline index fell by two points to –32 from September, increasing the risk that the economy as a whole could contract in fourth quarter. UK consumer confidence has been undermined this year by inflation that is almost double the wage growth and the largest government budget squeeze since World War II. Bank of England official Paul Fisher said yesterday that growth in UK “may be not much better than flat” in the fourth quarter and there is “significant” chance of another recession. BoE policymakers expanded stimulus program this month for the first time since 2009 as Eurozone debt crisis melted financial markets and data showed that UK GDP barely rose in second quarter. With light economic calendar for the reminder of the week expect for the pound to remain under pressure against its major rivals as economic recovery in Britain stalls.

The euro gained across the board after European Union leaders agreed to expand the rescue fund for indebted nations and reached an accord with lenders on writedowns for Greek debt. The officials agreed to boost the region’s rescue fund (EFSF) capacity to 1 trillion euro and managed to persuade holders of Greek bonds to accept a 50% writedown on the country’s debt.  Looking ahead to today, French Consumer Spending headline the economic calendar, with the expectations for the figures to weaken further in September.

The dollar consolidated against its major rivals during the Asian session as risk aversion in the markets eased after EU leaders reached the agreement regarding debt crisis and US economy grew at fastest pace in a year in Q3. US GDP figures released yesterday showed that world’s largest economy expanded at a 2.5% annual rate in the period from July through September. Federal Reserve policymakers are meeting next week and are considering additional measures of their asset purchase program in order to reduce an unemployment rate that has been stuck at 9% or higher since 2008. Looking ahead to today, university of Michigan Confidence headline the economic calendar, with the expatiations for the October figures to have improved from previous reading.

Euro Flat Vs Pound Before EU Summit

The pound is higher against the dollar this morning, but remained muted against the euro before the EU leaders meet in Brussels today to resolve region’s debt crisis. Sterling was supported yesterday after current account deficit in the second quarter narrowed to 2 billion pounds, the smallest since 2008, after reaching 4.1 billion in the first three months of this year. Looking ahead to today, the CBI releases its industrial trends survey at 11:00, with the expectations for the headline total orders number to increase to –7 from –9 in September. Separately, BoE policymaker Adam Posen is speaking in New York today at 19:00. With relatively light economic calendar scheduled for today expect for the pound to remain driven by the events on the continent.

The euro was little changed against most of its major rivals before the EU leaders meet today to discuss the debt crisis. EU leaders are holding the 14^th crisis summit in 2 years to discuss Greece’s bailout, the recapitalization of banks and strengthening the 440 billion euro rescue fund. German Chancellor Angela Merkel is due to address lower-house lawmakers on the crisis in Berlin midday today. As there are no major economic releases scheduled in Eurozone today, market participants will pay close attention on EU summit outcome.  

Euro Falls Before EU Leaders Meet On Wednesday

The pound was little changed against its major rivals during the overnight trade before European leaders create the feasible solution to the debt crisis in the region. Prime Minister David Cameron warned that turmoil in the euro area is having a “chilling effect” on the UK economy. Looking ahead to today, BoE Governor Sir. Mervyn King and his deputy Charles Bean will attend parliament to answer questions from members of the Treasury Committee on the topic of additional quantitative easing. This follows the MPCs announcement of a further 75 billion pounds gilt purchase at the October policy meeting. Also scheduled for today is the BBA lending data for September and current account data for Q2, with expectations for a current account deficit to remain at the same level as previous month.

The euro dropped against most of its major rivals during Asian session as European banks snubbed the idea on the size of the loses they were suggested to accept on the Greek bonds, decreasing the likelihood of a deal at tomorrow’s summit.  Eurozone leaders are seeking an agreement on bolstering the region’s rescue fund, recapitalizing banks and providing debt relief to Greece to avoid crisis spreading to Italy and Spain.  On the data front, German and French consumer confidence numbers came out better than expecting providing some relief for the single currency. Expect for the euro to experience an excessive volatility ahead of the tomorrow’s EU summit in Brussels.

Dollar Drops On Prospects More QE

The pound is mixed this morning, dropping against the euro, but gaining against the broadly weaker dollar on speculation Federal Reserve will consider additional easing measures in order to boost economic recovery. Sterling strengthened on Friday after report showed that UK budget deficit narrowed in September more than economist forecast, setting the country’s net borrowing (excluding support for banks) to 14.1 billion pounds from 15.4 billion a year earlier. There are no economic releases or policy speeches scheduled for today.  Looking to the week ahead, BBA (British Banker’s Association) lending data for September and current account data for Q2 are scheduled for Tuesday, with the expectations for current account figures to improve slightly. Also, Bank of England Governor Mervyn King will attend parliament to answer questions from members of the Treasury Committee on the subject of quantitative easing. On Wednesday and Thursday CBI (Confederation of British Industry) publishes its industrial trends and distributive sales figures for October. Finally, we receive Gfk consumer index for October on Friday, with projections for figures to remain unchanged at –30 from previous month.

The euro gained against its major rivals during the overnight trade after French Finance Minister Francois Barion said he is “convinced” leaders will find solution on region’s debt crisis by Wednesday. The EU leaders excluded a forced restructuring of a Greek debt, but remained firm on previous plan of enticing bondholders to write down 40% of their Greek debt in order to help restore country’s finances. The idea was pushed by Germany, defeating French efforts to boost the rescue fund (EFSF) by enabling it to borrow limitless sum from the independent central bank. On the economic docket scheduled for today, French and German PMI data is due out this morning, with expectations for the manufacturing and services figures to have deteriorated further in October.

The dollar dropped across the board during the Asian session as global shares gained after a report showed China’s manufacturing may expand in October, sapping demand for so called safe-haven assets. Greenback’s sentiment was dented on speculation the Federal Reserve will consider additional quantitative easing in order to bolster the economy. Fed Vice Chairman Janet Yellen said on Friday that a third round of purchases might became warranted, given the bleak economic outlook.  Looking to the weak ahead, third quarter GDP figures headline the economic calendar, with the expectations for the world’s largest economy to expand 2.5% in three months through September.

Euro Drops On Debt Concerns

The pound remained relatively muted during the overnight trade after UK consumer confidence in September fell for a fourth consecutive month, as unemployment reached 15 year high and inflation in September reached 5.2%. An index of sentiment dropped by 3 points from the previous month to 45, the lowest reading since the first half of 2011. The Bank of England Minutes this week revealed that economic growth may stall in the current quarter after second quarter GDP was just 0.1%. The Minutes report also showed that all nine members of the Monetary Policy Committee (MPC) voted to raise QE program to 275 billion pounds and left the benchmark rate unchanged at 0.5%. Looking ahead to today, public finances data for September headline the economic calendar, with the expectations for the PSNBx (Public Sector Net Borrowing excluding Interventions) to drop to 15.0 billion pounds from 15.9 billion pounds. The year to date borrowing numbers suggests that the government is on track to achieve its deficit target, but weak economic outlook in second half of the year may prove to be too much to accomplish the same result in the second half of the year. Expect for the pound to remain driven by the events in Europe as EU leaders meet in Brussels on a two-day meeting to discuss the ongoing debt crisis. 

The euro dropped against most of its rivals during the Asian session on concern that European policymakers can’t find the solution to break a deadlock between Germany and France on Eurozones debt crisis. The EU is considering several scenarios regarding Greek crisis, raging from sticking with July’s voluntary swap to a so-called hard restructuring, where investors could be forced to exchange Greek bonds with new ones at 50% of their value. Looking ahead to today, German IFO business confidence report headlines the economic calendar, with the expectations for the release to drop to the worst level of the year. Expect for the single currency to find its short-term direction after EU summit this weekend.     

Pound Drops Before Retail Sales Release

The pound fell against the dollar during the overnight trade ahead of the Retail Sales release scheduled for this morning. The gauge is expected to show that retail sales remained flat in September after dropping 0.2% in the previous month, adding to the signs of weakening economic recovery. Separately, Bank of England MPC member, David Miles, said in a report yesterday that wide range of people have seen declines in their real incomes while high inflation has created an extraordinary difficult situation.  Miles said the MPC had relaunched quantitative easing to boost money supply and keep demand up in the economy regardless of the inflation reaching above 5% levels. With relatively light economic calendar scheduled for today expect for the pound to remain driven by the events on the continent.

The euro dropped during the overnight trade as Germany and France disagree over the solution strategy of ongoing debt crisis. The major stumbling point was the role of the European Central Bank, as German policymakers oppose the French idea for central bank to use its balance sheet to bolster the 440 billion euro European Financial Stability Facility (EFSF).  The currency was also undermined following reports that IMF is split with ECB and EU over sustainability of the Greek debt and asking for clarification ahead of delivery of the next tranche of financial aid. Looking ahead to today, German Producer Prices headline the economic calendar with the expectation for the figure to increase by 0.2% in September, pushing the year-to-year figure to 5.5%. Additionally, German Economy Ministry presents new government economic forecast today in Berlin. Except for the single currency to remain under pressure ahead of EU summit in Brussels scheduled for this weekend.  

Euro Gains On Speculation EU To Boost The Rescue Fund

The pound dropped against the broadly stronger euro but consolidated against the dollar before the Bank of England releases Minutes from its October meeting. Market participants expect to see that MPC voted unanimously for resuming the QE as well as keeping the benchmark rate unchanged at 0.5%. However, with bleak economic outlook it is expected for the tone of the Minutes to be muted.  The main focus of the report will be to anticipate the central bank’s stance on expanding asset purchase program beyond the GBP75 billion target. In a speech in Liverpool last night, BoE Governor Mervyn King said that governments are not doing enough to tackle the fundamental problems facing their economies. He said that the major problem during financial crisis was one of solvency of banks and of governments and not liquidity, and that global economy needs a “bold response” in order to solve the underlying problems. The Governor has acknowledged that many people find it odd that the MPC had expanded QE with inflation rising to 5.2% but reiterated the view that the inflation is at its peak on medium term. In conclusion, Sir Mervyn said that central banks should aim at returning interest rates to normal and lowering the budget deficits, though turmoil in Eurozone and slower growth will delay the process.

The euro gained across the board during the overnight trade on speculation that France and Germany are closer to an agreement to boost the size of Eurozone’s rescue fund to contain the region’s fiscal crisis. The Guardian newspaper has reported that two nations support increasing the size of the European Financial Stability Facility(EFSF) from 440 billion euros to 2 trillion euros ahead of a summit this weekend. European leaders prepare for a summit on Greek crisis on October 23 before G-20 leaders meet on November 3. The single currency sentiment was not dented even after Moodys Investor Services reduced Spain’s credit rating yesterday by two levels to A1 from Aa2. Expect for the euro to remain supported against its major rivals ahead of the EU summit this weekend as expansion of the EFSF could help continental banks to rebalance its capital.

The dollar dropped against its major rivals during Asian session on increased risk appetite and ahead of the inflation report scheduled for today. The US consumer prices are expected to have increased only by 0.3% in September after rising 0.4% in the previous reading, the smallest gain in three months. Also scheduled for today is the Housing Starts report with projections for the homebuilding to have rebounded in September from the slowest since May.

Euro Drops As French Credit Rating Comes Under Pressure

The pound is mixed this morning, consolidating against the dollar, but gaining against the broadly weaker euro after Moody’s Investors Service said France’s top credit rating is under pressure. The British currency weakened against the dollar on concern that UK economic growth will falter on euro region’s debt crisis. Looking ahead to today, consumer price data for September headlines the economic calendar. Market census is calling for CPI inflation to have reached 4.9%, versus 4.5% in August, and RPI inflation of 5.4% against 5.2% in the previous reading. Market participants are expecting considerable increase in inflation due to the impact of utility price increases. Separately, Bank of England Governor Mervyn King delivers speech to the Institute of Directors today at 20:00. Expect for the pound to remain driven by economic data and events on the continent.

The euro dropped across the board during the overnight trade after Moody’s Investors Service warned France regarding its credit rating. The agency said that France’s financial strength has weakened because of the global financial and economic crisis, making the nation’s debt rating the weakest among its Aaa peers. Single currency came under pressure yesterday after German Chancellor Angela Merkel said that “dreams” of an imminent resolution to the debt crisis aren’t likely to be fulfilled at next summit of European leaders. Looking ahead to today, ZEW Survey of Economic sentiment headlines the economic calendar in Eurozone with the expectations for the figures to deteriorate further. Expect for the euro to remain under pressure ahead of this weekend’s EU leaders summit.

Pound Droops Versus Euro As EU Prepares To Recapitalize Its Banks

The pound is mixed this morning, gaining against the broadly weaker dollar, but consolidating against the euro on speculation Europe will tackle its debt crisis. The single region currency gained across the board before European Commission President Jose Barroso presents proposals on bank recapitalization as Germany and France pledged to work out a plan in November.  Looking ahead to today, the visible trade deficit figures are published at 9:30, with the expectations for the deficit to have narrowed to 8.8 billion pounds in August from 8.9 billion in the previous month. Separately, Bank of England policymaker Charles Bean said to the Guardian newspaper that MPC is doing all it can to respond to a sharp deterioration in the economic climate. The BoE expanded its asset purchase program by 75 billion pounds and left the base rate unchanged at 0.5% on their October meeting. The shift in the BoE’s position came in response to the sharp slowdown in the economic activity in the UK and rest of the world.  Mr. Bean also stated that should the UK’s economic picture deteriorate further the central bank would not hesitate in increasing the asset purchase program.