Currency markets future directions

US Dollar and Sterling should continue to improve against the Euro and Yen for the short term at least.

With the presumption being that the improvement in performance for both economies can be traced back to their recently acquired, more competitive exchange rates. 

Large moves in the next day or so, do look limited however, given the upcoming monetary meeting in Europe and the UK and given that much of the Euro’s recent weakness has been as a direct result of negative news from Greece. 

It has to be assumed that most, if not all, the bad news has been priced in by markets now and the currency might be set for a bit of a lift as it benefits from an increase in risk appetite. 

The Euro itself looks unlikely to surge however, given the likelihood of IMF intervention in Greece’s affairs and for those precious metal aficionados out there, it is worth noting that at present, Greece holds over 71% of its foreign reserves in gold, which at the end of December stood at just shy of $4 billion. Watch the gold price after the IMF have been in …..

Overnight the Reserve Bank of Australia surprised all but a few by leaving their official interest rates at 3.75 % against the expectation of a 0.25% increase, citing the lack of credible information so far on the effects of the previous increases, thus judging it appropriate to hold rates steady for the time being. 

The Aus$ dropped sharply on the release but stabilised on a later caveat from the RBA that if the economy continued to improve, as has been witnessed over the recent period, rates would need to be raised further. The currency held at around 88 cents versus the US$ but given the anticipated continued demand from China for global commodities.

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