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Dollar Gains As S&P Downgrades Major Banks

The pound remained strong against its major rivals during the overnight trade regardless of the weak consumer confidence release. The GfK/NOP Consumer Confidence Index rose 1 point from October to –31, but remained close to its lowest level in more than two years. An index of sentiment has been at or below the –30 level for five out of 11 months this year, and the outlook looks very gloomy. The Bank of England governor Mervyn King said this week that the UK is being “increasingly threatened”, while the Chancellor of Exchequer George Osborne sad yesterday that growth will be slower than forecasted next year. The Office for Budget Responsibility (OBR) reported that the economy will expand only by 0.9% this year, and cut its 2012 growth projection to 0.7%, less than the 2.5% forecast in March. With no major economic releases or policy speeches scheduled for today expect for the pound to remain driven by market risk aversion. 

The euro consolidated during the Asian session on concern Eurozone policymakers will fail to contain the debt crisis. The euro-area finance ministers approved enhancements to their bailout fund yesterday, but the action failed to reassure the investors as they dumped single region currency. Looking ahead to today German labour figures headline the economic calendar, with the expectations for the number of unemployed in November to remain unchanged at 7.0%. Also scheduled for today are the Eurozone inflation figures for November and unemployment rate for October.

The dollar gained against most of its major rivals during the overnight trade as investor run for safety of the US currency after Standard&Poor’s rating agency downgraded some of the world’s largest banks. S&P lowered the ratings of Goldman Sachs Group Inc and Bank of America Corp to A- from A, as part of criteria changes started three years ago. The rating agency also reduced the rankings of JP Morgan Chase & Co., Morgan Stanley, Citigroup, and UBS AG.  Looking ahead to today, Federal Reserve releases its Beige Book Economic Survey today at 19:00. Expect for the dollar to remain volatile ahead of this week’s employment data.

 

Pound Volatile Before Chancellor Presents Autumn Statement

The pound remained relatively flat against most of its major rivals before the Chancellors Autumn Statement is delivered today at midday, coupled with the OBRs (Office for Budget Responsibility) Economic and Fiscal Forecasts report. The market participants expect for the Chancellor to announce a number of policy measures aimed at boosting growth, but to remain in line with its fiscal austerity plans. Office for Budget Responsibility report, scheduled just after the Chancellor’s addressing to the parliament will most probably show that the government is meeting its fiscal targets, however the final realization of balance target will be met only by 2016-17, two years later than projected in March. Overnight, Nationwide house report showed that house prices rose slightly in November (0.4%), marking it the third successive month of increasing prices. However, Nationwide said that the resilience in prices is mostly due to the lack of supply on the market as demand remained subdued and the factors underpinning demand had deteriorated further. Sterling came under pressure yesterday after OECD has cut its UK growth forecasts significantly and now expects the British economy to slide back into recession. In the same note Bank of England Governor Mervyn King said the Britain is being affected by euro-area crisis, and authorities must be ready to act if it continues to escalate.

The euro remained higher against the dollar before European finance ministers meet in Brussels today to discuss the ongoing debt crisis.  The European financial chefs will debate the details on how the EFSF (European Financial Stability Facility) will boost its impact by insuring sovereign debt with guaranties. Separately, the Italian Treasury is scheduled to sell up to 8 billion euro of debt today, and some analyst are predicting that the government may be forced to pay more than 7% in today’s debt auction. OECD (Organization for Economic Cooperation and Development) said yesterday that Italian economy may contract next year as debt crisis damps confidence and complicates financing. The OECD forecasts for Italy to expand by 0.7% this year before shrinking by 0.5% in 2012 and called for Italian government to implement the structural reforms and balance its budget deficit. Expect for the single region currency to remain volatile as region’s debt crisis in weighing on the currency.  

 

Pound Drops On Weak Housing Data

The pound consolidated during the overnight trade on bleak housing data and after British Chamber of Commerce cut UK’s economic growth forecasts. Hometrack Ltd. reported that the average cost of home fell 0.2% from October and was down 2.3% from a year earlier. Also weighing on the sterling was the BCC’s (British Chamber of Commerce) statement, warning that the risk of another recession “cannot be shrugged off”, and predicted the Bank of England will expand its bond purchase early next year. Looking ahead to today, CBI distributive trade survey headline the economic calendar, with the expectations for the sales balance to have deteriorated to –12 from –11, amid signs of renewed pessimism over the consumer outlook. Separately, BoE Governor Mervyn King will appear at the Treasury Committee to discuss the November Inflation Report. Later in the week, the major event is the Chancellors Autumn Statement and release of the OBR’s (Office for Budget Responsibility) Economic and Fiscal Forecasts on Tuesday. Market participants anticipate from the Chancellor to announce a number of policy measures aimed at boosting growth, but to remain in line with its fiscal austerity plans. Also scheduled for Tuesday is the Nationwide house price index for November and the BoE’s money and credit data for October. On Wednesday, we receive Gfk consumer confidence index for November. Finally Thursday and Friday see the release of the November manufacturing and construction PMIs, with the expectations for both figures to deteriorate further. Expect for the pound to remain volatile before Chancellor of Exchequer address the Parliament on Tuesday. 

The euro gained across the board during the overnight trade on speculations European leaders are taking additional steps to tackle the region’s debt crisis. The single currency rebounded after German Finance Minster Wolfgang Scheuble urged fast-track treaty changes to tighten the budget discipline. German Chancellor Angela Merkel and French President Nicolas Sarcozy are planning a stability pact to counter the crisis before Eurozone finance ministers assemble in Brussels on Tuesday to discuss leverage options for the European Financial Stability Facility (EFSF).  Also scheduled for the week ahead are the employment data in the region published on Wednesday, with the overall rate expected to remain at 10.2%. Germany’s unemployment rate is projected to remain flat at 7%. Finally PMI manufacturing and services surveys are scheduled for Thursday and Friday, with the expectations for the figures to deteriorate further as debt crisis continues to weight on growth.

The dollar dropped against the euro during the Asian session as global stocks gained curbing demand for so called safe haven currencies. Euro region debt fears have pushed investor into dollar safety in past couple of weeks, but stronger greenback has made export conditions tougher for US manufacturers. The ISM manufacturing data for November is scheduled for Thursday, with the expectations for the index to rise to 51.5 in November from 50.8 in October. Looking to the week ahead, US jobs data headline the economic calendar, with the expectations for the non-farm payrolls data to show an increase of 120K jobs in November, leaving overall unemployment rate unchanged at 9.0%. Expect for the dollar to consolidate against its major rivals should we see signs of economic improvement in the world’s largest economy.

 

Euro Strengthens After Ifo Beats Estimates

The pound is mixed this morning, gaining against the euro, but consolidating against the US dollar ahead of the second estimate of third quarter GDP is released today. The Q3 GDP gauge is projected to remain unrevised at 0.5% on both quarterly and yearly basis. The second release of the GDP data will provide more insights on expenditure breakdown. Also scheduled for today is the CBI industrial trends data for November, with expectations for the figure to deteriorate further to –19 after dropping to –18 in the previous reading. Separately, Bank of England Minutes revealed yesterday that the policymakers were unanimous in their decision to leave the benchmark rate at 0.5% and maintain the target for asset purchase at 275 billion pounds. The central bank cut its growth and inflation forecasts last week and said yesterday that the threat from the euro-area debt crisis had increased and that underlying growth was probably weaker that the 0.5%.

The euro gained against most of its major rivals during the early morning session after German growth figures came in line with expectations and business confidence surprised on the upside. The Ifo Business Climate for November increased to 106.6 from 106.4 in October, while analysts expected decline to 105.2. The single currency was undermined yesterday after Fitch Ratings reported that France risks losing its top credit rating in the events of further economic shocks. In addition, German bond auction yesterday raised only two thirds of target as investors’ worry that European monetary union could collapse.

 

Pound Volatile Before BoE's Minutes Release

The pound dropped against most of its major rivals during the overnight session before the Bank of England releases minutes of this month’s policy meeting. The Bank of England’s Monetary Policy Committee left its base interest rate at 0.5% and held its asset purchase program unchanged at 275 billion pounds, after expanding it by 75 billion pounds in October. The minutes will reveal the stance within the BoE' officials, but the expectation is that the MPC voted unanimously to keep the interest rate and QE unchanged. The report is expected to give closer insides on why the committee held off from extending the asset purchase program, given the substantial undershot of the inflation target projected in November Inflation report. Separately, the BBA (British Bankers Association) lending data for October is also scheduled for today, with the expectations for the figures to have deteriorated from previous reading. The BoE official David Miles has argued that the UK housing market is likely to have been permanently transformed by the financial crisis, as the economy becomes less reliant on the housing market to drive consumption.

The euro consolidated during early morning session before the economic data scheduled for today may prove that Eurozone debt crisis is hampering economic growth. The PMI manufacturing gauge for Germany and France headline the calendar, with the expectations for the figures to prove that Europe’s two largest economies contracted in November. Expect for the single region currency to remain under pressure as Europe’s debt crisis is contaminating the economic prospects.   

 

Pound Volatile Before Public Finance Data

The pound rebounded against the dollar during the early morning session ahead of the Public finance report today at 9:30. The PSNB excluding Financial Interventions gauge is expected to have narrowed to 6.5 billion in October, after reaching 14.1 billion in the previous month.  It looks like the government is on the track to achieve its fiscal target of 122 billion pounds for the current fiscal year, although it is expected to have some corrections in the second half of the year from the deteriorating economic outlook. Separately, MPC member David Miles speaks at the Northern Housing Consortium in York today, one day before Bank of England announces minutes from its November meeting.

Euro gained against the pound during the overnight trade, ahead of the Euro-zone Consumer Confidence report that is expected to drop to a two year low. The gauge is projected to have dropped to –21 in November, the weakest reading since August 2009. Regardless, the single region currency is likely to remain under pressure on medium term as region’s sovereign debt crisis continues to pressure the investors around the globe to sell the currency.  

The dollar remained strong against its major rivals after rating agencies affirmed US credit rating. Moody’s affirmed the Aaa credit rating of the world largest economy, but maintained its negative outlook. Fitch Ratings said that the budget talks breakdown would likely lead to a revision of the US rating outlook to negative. The US Congress budget super committee failed to reach the agreement on reducing the budget deficit, getting closer to the November 23 deadline. Looking ahead to today Federal Reserve releases minutes of its November meeting.

 

Pound Consolidates After Disappointing Housing Data

The pound dropped across the board during the overnight trade after a report showed UK home prices fell the most in a year. Home sellers cut asking prices in England and Wales by 3.1%, the largest monthly drop since November 2010. There are no additional data release or policy speeches scheduled for today. Looking to the week ahead, minutes of the November MPC meeting and third quarter GDP data headline the economic calendar. On Wednesday Bank of England will release the minutes from its latest meeting, which are expected to show MPC members voted unanimously to keep Bank rate at 0.5% and the QE program unchanged at 275 billion pounds. It is expected that the committee will have stuck to its view that the outlook for the sustained economic growth remains uncertain. Third quarter GDP data will be published on Thursday, with the projections for the figures to remain unrevised at 0.5%. Also scheduled for this week is the Public finance release, with the expectations for the PSNBx (Public Sector Net Borrowing excluding Interventions) to have decreased to 6.5 billion pounds in October, after reaching 14.1 billion in the previous month. Expect for the pound to experience some downward pressure should we hear the Monetary Policy Committee is leaning towards additional monetary easing.    

The euro remains under pressure as government debt in the euro-area countries reached record highs as debt crisis is spreading to the bigger nations, including Spain, Italy and France. In Spain, Mariano Rajoy’s People’s Party swept the ruling Socialist Party and committed to brace the difficult austerity measures in order to stir the country from the debt crisis. Looking to the week ahead, PMI Manufacturing and Services release headline the economic calendar, with the expectations for the figures to deteriorate further. Also scheduled or this week is the German Q3 GDP final reading, with forecasts for the numbers to remain unchanged at 2.5%. Finally, German IFO Business survey is scheduled for Thursday and the figures are expected to confirm economic slowdown in the European largest economy. Expect for the euro to remain extremely volatile as debt crisis is hurting the single currency.

The dollar gained during the Asian session on speculation US congressional committee will announce it failed to agree on deficit cuts, boosting demand for so called “safe haven” currencies.  The deficit cutting congressional super-committee will probably announce that it has failed to reach agreement on federal budget savings, risking another credit downgrade by rating agencies. Looking to the week ahead, Tuesday’s publication of minutes from the Federal Open Markets Committee (FOMC) headlines the economic calendar. Market participants are going to look for any signs of additional fiscal measures anticipated by Fed as several central bank officials have publicly supported such a move. Also scheduled for this week are the Q3 GDP second reading and University of Michigan Consumer Confidence release. Expect for the greenback to remain supported against its major rivals as investors run for safety of the US currency.

Euro Under Pressure Ahead Of Spanish General Elections

The pound remained flat against the European single currency during the overnight trade, but gained against the dollar on speculation Federal Reserve will introduce the additional measures to lower the borrowing costs to stimulate the economy. Fed Bank of New York President said yesterday there’s more the central bank can do to boost the ailing economy. Similarly, Bank of England Monetary Policy Member Mr. Martin Weale, who earlier this year pushed for rate increase, now argues that there is a very strong case for extending asset purchase program in 2012 if the economy doesn’t improve. Mr. Weale said it was perfectly possible the economy is already shrinking and that investors are right to conclude that the central bank is likely to extend QE program beyond the 275 billion pounds already committed to. Expect for the pound to remain driven by market risk aversion, as there are no data releases or policy speeches scheduled for today.

The euro continued with its downward trend on concerns Eurozone debt crisis is spreading to larger economies including Spain, Italy and France. The single currency consolidated ahead of the Spanish general elections that are likely to see ruling Socialist party toppled. Looking ahead to today, German Producer Prices headline the economic calendar, with expectations for the figures to increase by 0.1% from previous month.

 

Pound Lower Ahead Of The Retail Sales Report

The pound consolidated against its major rivals during the overnight trade after the Bank of England reported that Britain faces weaker outlook for economic growth, adding to the signs the central bank may extend its QE program. BoE Governor Mervyn King said yesterday the UK economy faces a “markedly weaker” outlook amid persistent danger from turmoil in the euro area. Sterling was also undermined after figures showed that UK unemployment rose to 8.3% in the three months through September and joblessness among young people climbed above 1 million for the first time since 1992. Overnight, Nationwide consumer confidence index fell sharply to 36 in October, from 45 in the previous month as Europe’s debt crisis and economic outlook worsened. Looking ahead to today, Retail Sales report for October headlines the economic calendar, with the expectations for the figures to fall by –0.3% and core sales excluding auto fuel to drop by 0.2%.    

The euro dropped during early morning trade before Spanish government auction up to 4 billion euro of bonds today, and France sell as much as 8.2 billion euros of debit. The Italian 10 year bond yields fell yesterday after European Central Bank purchased larger than usual amounts under its Securities Markets Program. ECB President Mario Draghi said on November 3 that euro area economy is heading toward a “mild recession” by the end of the year. Expect for the single currency to remain under pressure as the likelihood of further ECB rate cuts are weighing on the single currency.

The dollar gained across the board during the Asian session on increased market risk aversion, but the US currency still remains volatile before Federal Reserve Bank of New York President William Dudley speaks today. Mr Dudley said last month that it’s “possible that we could do another round of quantitative easing”. The central bank announced in September a plan to replace 400 billion dollars in shorter maturity debt holdings with longer-term securities in a bid to reduce borrowing costs. Also scheduled for today are the Housing Starts for October and Philadelphia Fed Business Survey for November.  

 

Pound Consolidates Versus Dollar Before CPI Release

The pound consolidated against the dollar, but gained versus the euro as debt crisis in the euro-region continue to weight on the single currency. However, sterling came under pressure against the dollar during the overnight trade before we receive consumer price inflation (CPI) data for October. Market consensus is calling the CPI inflation to have fallen to 5.1% from 5.2% in the previous month, although the RPI inflation is projected to edge up to 5.5%. British economy is slowly entering the stagnation faze, with inflation figures reaching record high, while economic growth continue to falter. According to the OECD (Organization for Economic Co-operation and Development) the UK economic outlook has worsened for seventh straight month, mainly due to the Eurozone debt crisis, but also as other major economies have been experiencing economic slowdown. Expect for the pound to remain in current levels against the euro as investors run for safety of the UK currency after Italian and Spanish bond yields advanced.  

The euro declined across the board during the early morning session before Germany releases its investor confidence survey today at 10:00. The ZEW Investor Confidence survey (which aims to predict developments six month in advance), is expected to report that index of investors expectations declined to minus 52.5 this month from minus 48.3 in October, the lowest since November 2008. The single currency also came under pressure as Spanish bond yields advanced before offering bonds maturing on 2022 and ahead of the country’s general election on November 20.

The dollar gained against its major rivals during the Asian session as investors run for safety of the US currency amid market risk aversion. However, the gains in the greenback were limited on increased speculation the Federal Reserve will refrain from reducing liquidity in the economy to accelerate recovery through lower borrowing costs. Looking ahead to today, retail sales data headline the economic calendar with the expectations for the figures to have dropped in October. Market participants believe that the pace of economic recovery in the US is not strong enough to encourage the Fed to continue with monetary easing.