Sterling upside limited following Inflation report

Home » Forex 17 November 2011

After falling to fresh one month lows of $1.3423, the euro has recouped some of the losses seen versus the dollar and yen yesterday with players reported to be taking profits on recent moves. However, as the threat of contagion in the euro zone continues to build many are concerned at how long the single currency can remain resilient to the region’s sovereign debt problems. Though the problems may not be confined to the euro zone with Fitch yesterday warning of the exposure of US banks to European debt, which it described as

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Euro gains following last weeks sell off

Home » Forex 21 November 2011

The euro held steady around the $1.35 level in early morning trade, helped by a round of short covering going into the weekend. Reports of an EU paper on the issuance of common bonds also seemed to help the mood, as did news of an outright victory for the conservative party in Spanish elections. The dollar also came under some mild pressure with a US congressional super committee expected to make some formal announcement today on its plans for $1.2 trillion in budgetary savings over the next ten years. At the same time though, the focus remains very much on Europe as markets look for further clarity on the sovereign debt issue. As well as sovereign risk issues, the euro faces some key data releases this week. On Wednesday, November’s flash PMIs are due for release and expected to fall from already weak levels. Other data in the eurozone include a number of key business and consumer confidence and activity reports, including the closely watched German Ifo business climate index for November.

Meanwhile, in the US the main focus of attention will most likely be tomorrow’s release of the minutes of the last FOMC meeting, which took place at the beginning of the month. Recent US data have been reasonably positive but the outlook remains one of a prolonged period of subtrend growth. This is likely to be reflected in the tone of the minutes, amid ongoing speculation that the Fed may yet provide further quantitative easing if recent underlying weakness in the economy proves persistent. In terms of sterling, which has started the week at $1.575 versus the dollar, markets will be looking to Wednesday’s release of the minutes of the November Bank of England’s policy meeting for some direction, watching the tone of discussions to see if any MPC members are leaning towards voting for further quantitative easing.

Sending money abroad? Converting currency?

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Euro vulnerable following EU Summitt

Home » Forex 12 December 2011

The euro has started the week on the back foot versus other majors, dragged down by on-going talk of debt downgrades for Europe from Standard and Poor’s, despite the fact that the EU Summit reached a deal on Friday to tighten fiscal rules. The rating agency has yet to give its opinion on the deal and its comments are eagerly awaited. Many are treating the latest deal with caution, in particular given the UK’s opposition to it. According to a poll in the UK Times voters overwhelmingly back Prime Minister David Cameron for using his veto on the pact to toughen EU treaties without any new safeguards for London’s financial centre. As a result, the new fiscal rules will have to operate as an intergovernmental agreement instead of being enforced through a treaty change, which would need unanimous support. Ireland, however, may still require a referendum on the issue but the government is awaiting formal legal advice on this.

Market sentiment will continue to be driven by events in Europe, but the focus should turn to the US tomorrow with the Fed meeting to discuss US monetary policy for the last time this year. No policy changes are anticipated but markets will be watching the tone of its statement carefully. Meanwhile, markets will be looking to available US data for further confirmation that the economy is holding up reasonably well going into the year end. Data from the euro zone, however, are not expected to be uplifting. The release of the flash manufacturing and services PMIs for December should feature top of the agenda, with the data expected to show a further deterioration in activity levels. This should further cement the markets’ view that the region is back in recession. Meanwhile, the German ZEW index is also expected to fall again as the sovereign debt crisis continues to weigh.

Sending money abroad? Converting currency?

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