Pound Sterling – UK Markets

Sterling exchange rates came under continued selling pressure yesterday after weak retail sales reduced confidence in the pound. This morning sterling rose slightly against its European and Asian currency partners, trading at 1.62 against the US dollar and 1.13 against the euro.

Despite positive housing figures yesterday, the pound came under pressure from a report which showed business investment in the UK has fallen the most in 24 years. GDP figures released this morning have been revised upwards, showing that the UK economy contracted -0.7% in the second quarter, rather than the -0.8% previously recorded. This could help lift sterling today, while UK exchange rates will also likely be affected by consumer figures out in the US.

US Dollar – US Markets

Exchange rates for the US dollar are slightly lower this morning, losing ground against the pound, Australian and Canadian currencies. The greenback has climbed against the yen, euro and New Zealand dollar ahead of key consumer releases in the US today.

The core personal consumption index is due in the US today and this, along with personal income and expenditure for July will help provide an insight into consumer spending in the US economy. Consumer activity is crucial to economic recovery and the figures are expected to rise following the “cash for clunkers” initiative. The figures are due this afternoon.

Euro – European Markets

Euro currency rates have dipped slightly this morning, although the single currency remains at the top of recent ranges, particularly against the pound. The euro is currently trading at 1.43 against the US dollar and 0.87 against the pound.

The euro is heading for its second monthly gain on the US dollar, as euro sentiment has improved following the emergence of France and Germany from recession. German consumer confidence has leapt to a three-year high and European markets have gained this morning following positive results from Dell and higher metal prices. Economic and industrial confidence for the eurozone has exceeded market expectations this morning, while consumer confidence came in slightly lower than expected.

Other Currencies – Highlights

Currency exchange rates for the yen remain strong this morning, following news that Japan’s unemployment rate rose to 5.7%, ahead of the expected 5.4%. Consumer prices are also falling at record levels and as this comes on the eve of the general election, the news is a blow for incumbent prime minister Taro Aso.

Australian currency exchange rates are heading for the longest month of gains in over 20 years against the US dollar following a rally on the back of economic recovery. Record low interest rates and rising commodity prices have helped lead the Australian currency higher in recent months against the yen and US dollar. The New Zealand dollar is also on the verge of seven months worth of gains against the yen.

Pound Sterling – UK Markets

Sterling foreign exchange rates have declined this morning as markets digest the record budget deficit announced yesterday. The pound has declined against its major currency partners, with the exception of the Australian and New Zealand currencies.

New that the UK is running a record budget deficit kept sterling under pressure yesterday, with the pound remaining in low ranges against the euro and US dollar. Rising government debt may have contributed to the MPC decision to increase QE levels by another GBP50 billion and rising retail sales did little to boost investor sentiment. There is no major data in the UK today.

US Dollar – US Markets

US dollar foreign exchange rates received a boost yesterday after negative jobless figures triggered a spike in risk aversion. This morning the US dollar is trading at 0.69 against the euro and 0.60 against the pound.

New jobless claims rose by 576,000 in the week to August 15, more than markets expected which led to a bout of risk aversion yesterday. US dollar gains were trimmed however by the Philadelphia Fed which showed manufacturing in the region expanded for the first time in over a year. This is an important snapshot of the region as a whole. US existing home sales are out this afternoon.

Euro – European Markets

Foreign exchange rates for the euro remain strong this morning, climbing against its major currency partners with the exception of the yen and Swiss franc. The euro is currently valued at 1.42 against the US dollar and 0.86 against the pound.

German PMIs for both manufacturing and services have shown positive results this morning, coming in at 49 and 54 respectively. This is in line with positive German data released earlier in the week, indicating that the eurozone’s largest economy is on the way to economic recovery. PMI’s for the eurozone are slightly worse, coming in just under the 50 mark. There is no further data in the eurozone today.

Other Currencies – Highlights

Foreign exchange rates for the Australian dollar gained nearly a cent against the pound yesterday, after the UK budget deficit came in at a record figure. News that the Philadelphia Fed has expanded helped raise foreign exchange rates for the Aussie and Kiwi currencies, through boosting international risk appetite.

The Canadian dollar has also received a boost after wholesale sales rose 0.6% in June, the first increase in 9 months. Goldman Sachs also recommended buying Canadian dollars against the US in the short term which sent the CAD to a weekly high against the greenback.

Pound Sterling – UK markets

The pound has gained on the US dollar and is currently trading at 1.58, significantly stronger than the 1.55 level earlier in the week. Sterling is also trading at some of the best currency exchange rates in 2009 against the euro and yen on the back of improved investor confidence.

UK retail sales climbed by 0.9% in April putting the UK on track for a 2.6% annual rise in consumer spending. This figure however, is somewhat unreliable as the fact that Easter occurred in April this year creates some seasonal distortion. The Bank of England minutes released yesterday were in line with market expectations yesterday and unanimous MPC decision led the pound to strengthen against the dollar and single currency. The pound has risen over 5% against the US dollar this month, on track for its largest monthly gain in over a decade. First quarter GDP figures are due in the UK tomorrow.

US Dollar – US Markets

The dollar is broadly weaker this morning against its international currency partners, trading at 0.72 against the euro and 0.63 against the pound. The dollar has also lost ground against its Asian currency partners.
Minutes from the FOMC meeting referred to a potential increase in quantitative easing and this has weighed on the dollar yesterday. Uncertainty surrounding QE may affect the dollars status as a reserve and equities are in negative mode this morning. However, the weaker dollar has had little affect on international currency exchange rates suggesting that the view the economy is bottoming out could be gaining some traction. Markets will be interested in the Philadelphia Fed manufacturing survey due today as this is a good indicator of export levels.

Euro – European Markets

The euro has climbed above 1.38 on the US dollar this morning, significantly higher than last week’s best currency exchange rate. The euro is also stronger against most of its international currency partners after comments from the Portuguese finance minister that the strong euro was not a concern of the ECB.

Economic decline in the eurozone has slowed even further in May with both the manufacturing and service sector reporting a more moderate decline. PMIs are regarded as a reliable gauge of private sector activity and the positive figures have led the euro to strengthen this morning. With little data out in the eurozone for the rest of the day the euro-pound exchange rate is likely to be affected by market reaction to UK retail sales and employment data out in the US.

Other Currencies – Highlights

The pound gained over two cents on the New Zealand dollar yesterday. The two currencies are locked in a volatile trading relationship at present as the extent of recession and start of recovery remain unclear. The New Zealand dollar has climbed against its international currency partners this week, shadowing gains made by the Aussie and reports of economic improvement in Asia.

Canada’s annual inflation rate has fallen to 0.4%, the lowest since 1994 on the back of plummeting energy prices. Energy prices have fallen 25% in the last year and consumer prices fell 0.1 on the month. This gives the Bank of Canada more scope to keep interest rates low and the Canadian dollar has gained over 1% on the US dollar overnight.

Pound Sterling – UK Markets

Sterling is sliding this morning against its major currency partners with the release of first quarter GDP figures showing the UK economy contracted significantly in early 2009. This morning the pound has slid over 1% on the euro, yen and New Zealand dollar, and 0.4% against the US dollar.

ONS statistics show the UK economy contracted -1.9% in the first quarter of 2009. This follows a -1.6% contraction in the previous quarter and was substantially higher than the -1.5% predicted by most economists. This takes the annual growth rate to -4.1%, a contraction significantly larger than the 3% predicted by Alistair Darling earlier in the week. Retail sales figures, a key indicator of consumer spending, rose 0.3% in March. Sterling is likely to continue its bearish run today as these figures, along with the 12.4% budget deficit, play on the minds of investors. Credit agency Moody’s has also expressed concern over the levels of government borrowing, which is set to reach GBP175 billion this year, prompting concerns the UK may lose its AAA credit rating. There is no further data in the UK today.

US Dollar – US Markets

The dollar is weaker across the board this morning, down 0.9% against the euro and yen, gaining only on the pound in terms of the major currencies.

The growing perception of ‘green shoots’ emerging in the US economy this week has supported a series of rallies in markets, boosting some of the higher yielding currencies at the expense of the dollar. Solid corporate earnings from Bank of America and Citigroup and increased funding from G20 nations have contributed to the view that the worst of recession may be easing. These rallies however, remain capped by bouts of negative data, with news that home sales fell 3% in March renewing concerns over the property market. The Federal Reserve’s methodology for stress testing banks is released today with results of the tests due on May 4. Market opinion currently is that the purging of toxic assets is far from over and the extent of credit write downs could damage positive sentiment in weeks to come. Durable goods orders and new home sales are out today.

Euro – European Markets

The euro has gained across the board this morning, strengthening to test 1.32 against the US dollar and gaining over 1.3% on the pound. The single currency has dipped slightly against the yen, Swedish kronor and Swiss franc.

The euro has benefitted from a glut of negative data released in the UK this week and rallies in equities supporting slightly higher risk appetite. Economic data yesterday showing the pace of recession in the Eurozone easing also boosted confidence and the euro has moved to consolidate on this support. This morning, figures show the German IFO business climate and expectations rose to 83.7 and 83.9 respectively, which bode well for the rest of the region. There is no further data from the Eurozone today.

Other Currencies – Highlights

The Australian and Kiwi dollars have capped off a week of declines against the yen on concerns that recession will reduce demand for the export products of the two nations. Next week markets are likely to focus on the Reserve Bank of New Zealand’s interest rate decision where a 0.5% reduction is expected, and the National Bank of Australia’s business confidence survey.

Pound Sterling – UK Markets

The pound dipped to 0.90 versus the euro yesterday after the announcement of “eye watering” government debt in the UK rattled markets. Sterling lost ground the euro and dollar throughout the day but appears to have been given the benefit of the doubt this morning, maintaining support above 1.45 and 1.11 on the dollar and euro respectively.

The UK budget announced yesterday has been subject to in-depth economic analysis and will continue to do so over the coming days. Among the headline grabbers was Darling’s top tax rate of 50% and predicted growth contraction of 3-3.5% for 2009. Higher tax levels raised the issue of competitiveness internationally and prompted speculation that top investors would keep their money elsewhere. The government also confirmed the view that a weak pound in the short term will give export markets a much needed boost. The budget deficit, predicted to reach 12% of GDP, put gilt prices under pressure and sent Sterling exchange rates lower. Unemployment, the housing market, auto sales and the ‘greening’ of new industry also took precedence in the new budget. Bank of England minutes released yesterday showed the MPC unanimously voted to maintain current interest rates and quantitative easing levels. To cap off a big week in the UK, GDP figures and retail sales are due tomorrow.

US Dollar – US Markets

The dollar has weakened this morning, down over 0.5% against the pound, Australian and Kiwi dollars as positive news from the Eurozone has revitalised investor confidence. The dollar is currently in the vicinity of 0.68 against the pound, 0.76 against the euro and 98 against the yen.

Renewed concern over the banking sector caused a drop in equities late in the day yesterday as markets continue to oscillate between positive and negative territory depending on the latest set of data released. News that Morgan Stanley operated less profitably than expected, combined with the IMF report that contradicted UK growth predictions caused a plunge in risk appetite but markets have rallied this morning on the back of positive news from the eurozone. Initial and existing jobless claims, as well as new home sales for March are due in the US today

Euro – European Markets

The euro has rallied this morning, boosted by a flight from sterling following the announcement of the UK budget and on the back of economic data showing recession easing in the eurozone. The euro is currently trading at 1.30 against the dollar and is up to 0.89 against the pound.

The German purchasing manager index out this morning has shown decline at the slowest rate in 5 months in both the manufacturing and service sectors. Industrial new orders for the eurozone also dropped less than expected and the EMU current account came in a EUR-8.1 billion. In addition to the news that Credit Suisse operated profitably for the first quarter of 2009 and French economic sentiment rose for the second consecutive month, this has supported the euro and moderated market opinion that the eurozone is becoming more entrenched in recession. The Swiss ZEW survey is due later in the day with Germany’s IFO business climate and expectations survey due tomorrow.

Other Currencies – Highlights

The Australian dollar continue to tread familiar ranges against the dollar and euro but spiked against the pound overnight as sterling was battered by low growth predictions and high budget deficits from the UK budget. Core inflation in Australia remained relatively high and economists predict the central bank is nearing the end of its interest rate reductions. Poor results for Morgan Stanley sent the New Zealand dollar lower as risk appetite diminished and comments from New Zealand finance minister Bill English, that New Zealand may be in its sixth quarter of recession also hurt the Kiwi currency. The Australian and New Zealand dollars are trading in the vicinity of 2.04 and 2.59 respectively.

Pound Sterling – UK Markets

The pound has weakened this morning against most of its international currency partners in the run up to the budget released today. The pound is trading in the vicinity of 1.45 against the US dollar and is down 0.5% against the euro with further exchange rate volatility likely throughout the day.

This morning’s budget is expected to be the most negative in a generation predicting a 3-3.5% growth contraction for 2009 and a deficit climbing to 12% of GDP. The government is also expected to announce plans for spending cuts and rising tax from 2011 along with moves to revitalise the property market and create thousands of new jobs in the UK. Minutes from the last Bank of England meeting also released this morning are likely to have little affect on markets as it remains too early to asses the effects of quantitative easing. The ILO unemployment rate has risen to 6.7% in the three months to February and public sector borrowing has increased to GBP19.1 billion, significantly ahead of market expectations. Also this morning, HM Revenue and Customs has announced a 40% jump in home sales for March. The budget is released at 12:30.

US Dollar – US Markets

The dollar has gained against the pound and euro this morning as uncertainty over the UK budget and fallout from the IMF report are weighing on the major currencies. The dollar is trading in the region of 0.68 versus the Pound and 0.77 versus the euro and has gained on the Canadian, Australian and New Zealand currencies.

A speech from Treasury Secretary Geithner’s yesterday led markets to a brief rally as he reassured investors of bank balance sheets. Equity markets and currency exchange rates are largely determined by the prevailing mood regarding the banking sector at present as this determines international appetite for risk. The USD-GBP exchange rate will likely be affected by the UK budget released today and we could see a weakening of the pound against the dollar. US mortgage applications and the housing price index for February are released later in the day.

Euro – European Markets

The euro continues its bearish run of the currency markets this morning, trapped below 1.3 against the US dollar and 0.89 against the pound. The euro has also declined against its Asian currency partners as details of an IMF report predict a long and entrenched recession for emerging European nations.

Positive news yesterday came in the form of the German ZEW economic survey which showed a surprise rise in confidence from -3.5 to 13. However, the fact that the euro failed to fully capitalise on this speaks volumes about market perception surrounding the Eurozone at present. Continued uncertainty from the ECB and details of the IMF financial stability report are weighing on the euro. The IMF forecast yesterday that European banks could face more substantial write downs and require greater capitalization than US banks. The IMF also expects a net investment loss to Eastern Europe with little hope of recovery in 2010 and 2011. There is little of note in the Eurozone today with the EMU current account, purchasing manager index and industrial new orders released tomorrow.

Other Currencies – Highlights

The yen advanced overnight as Japanese trade balance figures show the slump is slowing down. March export figures snapped a four month spell of record losses and this, in combination with worries over what further stress tests could expose in the US, caused the yen to advance on a basket of international currencies.

The Bank of Canada cut interest rates to a record low of 0.25% yesterday and plans to leave it there until inflation returns to its 2% target. The Canadian economy is expected to shrink 3% this year and the central bank is expected to announce a framework for quantitative easing on Thursday. This is weighing on the Canadian dollar at present. Leading indicators are published today.

Pound Sterling – UK Markets

Interest from home-buyers is starting to gain “real momentum”, although sales remain low, the Royal Institution of Chartered Surveyors has said. While new enquiries in the housing market increased for the fifth consecutive month, surveyors are still selling fewer than 10 homes on average each over the last three months. Nonetheless, there the poll found increased optimism that sales would pick up during the year, but it remained tough for first-time buyers.

With little fresh news from elsewhere following the Easter holiday, currency markets have been taking their cue from equities. With London FTSE index falling 0.3 percent in early trade, the pound has fallen against the US dollar this morning with investors once again returning to the perceived safety of the US currency. The pound will currently buy between 1.4804-1.4908USD.

US Dollar – US Markets

Retail sales in the US unexpectedly fell last month as rising unemployment forced consumers to ease back. In a report released yesterday, the Commerce Department said that the US retail had seen a 1.1% decrease in March. Car dealers, electronics stores and restaurants led the decline.

However, with Federal Reserve Chairman Ben Bernanke echoing Barack Obama’s comments by stating that the “sharp decline” in the US economy is slowing, the dollar has been enlivened by safe haven flows against the pound and the euro. While there is still unease ahead of earnings from the likes of Citigroup and JP Morgan Chase, the euro fell around 0.6% against the greenback and is now currently trading at an interbank rate of between 1.3265-1.3286USD.

Euro – European Markets
Following the release of the German March wholesale price index report, the euro showed mixed trading against its major counterparts. While the euro eased against the dollar and the franc, it gained slightly against the pound.

The euro is currently worth around 0.8907-0.8912 against the pound.

Other Currencies – Highlights

China’s economy is showing some signs of recovery from the global financial crisis, the country’s Prime Minister Wen Jiabao has said. China has already implemented a 4tn yuan stimulus package to boost economic activity. Despite its problems, China’s economy – the third biggest in the world – is forecast to grow by at least 5% this year, in stark contrast to many major global economies that are shrinking.

Poland’s government is to ask the International Monetary Fund for a USD20bn credit injection to help tackle the economic crisis. Finance Minister Jacek Rostowski said it would increase bank reserves and make Poland “immune to the virus of the crisis and speculative attacks”. Rostowski said the move would increase state bank reserves by about a third.

Pound Sterling – UK Markets

With the UK celebrating Easter over an extended four-day weekend, market news is a little light on the ground today. However the pound has this morning hit a 4-day interbank high of between 0.8863-0.8963 against the euro. Citing trading patterns, analysts from BNP Paribas SA are anticipating the euro declining to a six-week low of around 88.50 later this week.

US Dollar – US Markets

A day after Barack Obama said that he sees “glimmers of hope” in the US economy, Goldman Sachs has reported a net quarterly profit of USD1.8bn, beating analyst expectations. The previous quarter had seen the firm post its first quarterly loss since going public in 1999. Some analysts say the earnings results could suggest the worst could be over for finance firms.

The announcement from Goldman Sachs follows a statement from Wells Fargo that said the bank expected a record net profit for the quarter. Citigroup Inc. and JP Morgan Chase & Co. are both due to report earnings this week.

Following the announcement, the euro is down slightly against the US dollar with investors seeing the announcement as a strong sign that the US economy is on the up. The 16-nation currency will currently buy USD around 1.3282-1.3353 at an interbank rate.

Euro – European Markets

The German government announced over the weekend that they will decide on 21st April whether to set up a “bad bank” to take on banks’ liquid toxic assets, allowing them to return to their core business. The issue has been under discussion for several weeks and received another impetus last month after the US administration unveiled its Public-Private Investment Program, aimed at helping banks to sell troubled assets to public-private partnerships.

According to the Monster Employment Index, unemployment in the European Union looks set to rise further in March as companies continue to trim costs and employment opportunities recede. The Index slid three points to 112 in March after a surprise increase in February. Monster said the steepest declines in online recruitment opportunities were in the marketing, public relations and media, environment, engineering and auto sectors.

Other Currencies – Highlights

Singapore’s economy shrank by 19.7% in the first quarter of 2009 compared with the previous three months, its biggest quarterly contraction on record.  The government now expects the country’s GDP to contract by between 6% and 9% this year, much more than the previous estimate of between 2% and 5%. The country’s Ministry of Trade and Industry said the economy’s performance was much worse than expected.

Pound Sterling – UK Markets

UK consumer confidence fell in March as fears continued about jobs, according to the Nationwide whose confidence index dropped two points to 41. UK unemployment recently hit two million for the first time since 1997. Nationwide said consumer confidence was “broadly stable since the start of the year, but feelings about the current labour market have weakened”. Nationwide’s consumer confidence index has now fallen for nine consecutive months.

US Dollar – US Markets

Dallas Federal Reserve Bank President Richard Fisher has minimised downside risks to the US dollar posed by the US government’s rapidly rising borrowing needs.

In a statement delivered at a forum in Tokyo, Fisher said that problems facing other currencies, such as the euro, were bigger than those facing the United States. As a result, dollar-denominated assets will remain relatively attractive, he said.
Following Fisher’s comments and the Eurostat report, the euro is currently around an interbank rate of 1.308-1.336 against the US dollar this morning, down around 0.6%.

Euro – European Markets

French trade deficit widened in February to EUR4.11 billion from a revised figure of EUR3.71 billion in January – a figure slightly lower than expected – data from the Customs Service showed today. Exports in February fell to EUR28.86 billion from EUR29.29 billion the previous month, while imports also fell to EUR32.97 billion from EUR33.01 billion in January.

The Irish Republic has unveiled its second budget in six months to deal with its rapidly contracting economy. The emergency budget includes a large rise in taxes and a cut in spending, to deal with Ireland’s budget deficit. Finance Minister Brian Lenihan also said an independent agency would take over banks’ bad assets to try and restore lending. His forecast for 2009 was also revised down sharply. He expects it to contract by 8% this year, down from 3% in 2008. Dublin is being forced to deal with a deepening recession while being forced to correct the worst deficit in Europe.

Other Currencies – Highlights

Australia’s Department of Employment and Workplace Relations has said that its leading indicator of employment fell to a negative 0.579 in April from a negative 0.336 in March – the 16th consecutive monthly decline. The indicator measures four weighted time-series variables: ANZ newspaper job ads, Dun & Bradstreet employment expectations, the Westpac-Melbourne Institute leading index of economic activity survey and the Westpac-Melbourne Institute consumer sentiment survey, with the first three of these four contributing to the indicator’s decline in April.

The Australian Bureau of Statistics is due to issue March employment data tomorrow. The jobless rate rose to 5.2% in February, up from 4.8% in January.

Pound Sterling – UK Markets

UK manufacturing output declined for the 12th straight month in February, while the quarterly measure recorded its steepest drop since records began in 1968, a report from the Office of National Statistics has said.

Although manufacturing output fell 0.9% on the month in February, it compares with a revised 3.0% drop in January and marks the smallest monthly drop since August 2008.

Following the data, the Pound is crawling higher against the US dollar to an interbank rate of between 1.469-1.487, and has risen to an interbank rate against the euro of around 0.9084.

US Dollar – US Markets

The US dollar has risen against the euro and the yen on Monday as American and European stock markets fell lower as recent hopes about economic recovery stalled and investors sought out safe haven currencies. Worries about the financial sector in particular have hit market sentiment hard as banks such as Bank of America, JPMorgan Chase and Fifth Third Bancorp took a series of broker downgrades.

At one point yesterday, the continually weaker Japanese yen dropped to a six-month low against the greenback. The dollar rose to around 101.5 yen before easing back down to around 100 yen.

Euro – European Markets

On an annual basis, retail sales fell by 4% in the eurozone during February, a figure that is 0.6% down from January’s figures. Retail sales have been under pressure from rising European unemployment, which currently stands at 8.5% across the 16-country eurozone.

Other Currencies – Highlights

The Reserve Bank of Australia has cut interest rates to a 49-year low. The cut of a quarter percentage point take interest rates to 3%. Most economists had been predicting no change to rates.

Separately, the Bank of Japan has kept its rates at 0.1%, in line with expectations. However, the Japanese central bank expanded the collateral it will accept in return for loans to commercial banks, now accepting loans on deeds to municipal governments.

A revival in global risk appetite has propelled the South African rand to a near six-month peak against the US dollar. The pair are currently trading around R9.099-R9.139. A surprise contraction in South Africa’s trade deficit and the economy’s resilience in the wake of the global financial crisis have all conspired to boost the rand by around 7% in the past week.