New Sterling lows on credit crunch fears
Sterling was hit hard yesterday after data revealed house prices fell sharply in March. Prices slumped 2.5% which is the biggest decline since the 1992 house price crash.
Talk of an interest rate cut tomorrow is also weighing on the pound. GBP/USD slipped from above 1.9900 to around 1.9650 while GBP/EUR hit fresh all time lows at 1.2500 this morning and with EUR/USD still robust there could be more to come.
On a trade weighted basis Sterling is at its lowest level in 11 years.
The market has priced in a 25bp rate cut but inflationary pressures still remain and anything more aggressive to curb the falling houses price would add further inflationary pressure.
Meanwhile the USD eased against the EUR after the minutes from the previous Fed meeting revealed a prolonged and severe economic downturn can not be ruled out.
The Fed appears it will take any necessary steps to minimise the impact of the financial and housing turmoil even if inflation continued to push higher.
The move in EUR/USD was restricted however as there is rising concerns the US economic slump will have global impact. This already appears to be happening in the UK given the housing data but any impact on the Euro zone has not yet surfaced.
Meanwhile in Japan the central bank downgraded its growth outlook with exports expected to be hit severely by the slumping US economy. The Bank of Japan also swore in a new governor, Masaaki Shirakawa, ending a political deadlock which began when Fukui retired last month.
Today sees the release of UK industrial production which is expected to be 0.2% for the month. Euro GDP is expected to be 0.4% mom / 2.2% but the main focus will still be tomorrow's ECB and BOE rate announcements along with US Initial jobless claims.
The contents of this blog are for information purposes only. It is not intended as a recommendation to trade or a solicitation for funds. The Wise Money Blog cannot be held responsible for any loss or damages arising from any action taken following consideration of this information.
Talk of an interest rate cut tomorrow is also weighing on the pound. GBP/USD slipped from above 1.9900 to around 1.9650 while GBP/EUR hit fresh all time lows at 1.2500 this morning and with EUR/USD still robust there could be more to come.
On a trade weighted basis Sterling is at its lowest level in 11 years.
The market has priced in a 25bp rate cut but inflationary pressures still remain and anything more aggressive to curb the falling houses price would add further inflationary pressure.
Meanwhile the USD eased against the EUR after the minutes from the previous Fed meeting revealed a prolonged and severe economic downturn can not be ruled out.
The Fed appears it will take any necessary steps to minimise the impact of the financial and housing turmoil even if inflation continued to push higher.
The move in EUR/USD was restricted however as there is rising concerns the US economic slump will have global impact. This already appears to be happening in the UK given the housing data but any impact on the Euro zone has not yet surfaced.
Meanwhile in Japan the central bank downgraded its growth outlook with exports expected to be hit severely by the slumping US economy. The Bank of Japan also swore in a new governor, Masaaki Shirakawa, ending a political deadlock which began when Fukui retired last month.
Today sees the release of UK industrial production which is expected to be 0.2% for the month. Euro GDP is expected to be 0.4% mom / 2.2% but the main focus will still be tomorrow's ECB and BOE rate announcements along with US Initial jobless claims.
The contents of this blog are for information purposes only. It is not intended as a recommendation to trade or a solicitation for funds. The Wise Money Blog cannot be held responsible for any loss or damages arising from any action taken following consideration of this information.
Labels: credit crunch, Weak Sterling, wise money
posted by Wise Money @ 10:20 AM
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