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.

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.

Aussie Dollar shines whilst US Dollar weakens further

More weakness for the US Dollar yesterday across the markets except against the Yen. 

This push on US Dollar weakness relented in later trading after the Fed beige book posted a slightly bullish report for the US economy. Today is a big day for the USD with the eagerly awaited retail sales data and corporate earnings reported by Intel…the USD will need good news from both to stage a recovery and prevent further selling pressure.

The big winner in the markets was again the Aussie. The catalyst was better than expected jobs data; the unemployment rate dropped to 5.5% from 5.8% from the month earlier as the number of people in work rose by 35,200 in December. 

Australia is the stand out performer of G20 nations and has rallied on stronger commodities and increased demand from China. It will be interesting to see if the RBA raise interest rates at their next meeting; if so we could see AUD/USD hit parity and GBP/USD mover into the 1.60’s.

Sterling has benefited on feedback from the National Institute of Economic and Social Research (NIESR) which yesterday estimated Q4 GDP at +0.3% and thus out of recession. 

However it was still the worst year for the UK economy since 1921. A good week so far for sterling which was initially buoyed by hawkish comments from MPC member Andrew Sentance. Surely we are due for some bad news now…or is it the start of a sustained rally?

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.

Higher yielding currencies early 2010 gains

Positive interest in many Far Eastern and Antipodean currencies continues as investors look to the Asian and Pacific regions for the most likely currency appreciation during 2010. 

Apparently confirming the view, a researcher at the China Academy of Social Sciences (a Chinese Think Tank) told reporters that the Renminbi should be revalued by a one-off 10%. This, though, was mis-translated apparently with the Chinese version reading, they ‘think that it is good to push for a 10% rise but that NOW is NOT the right timing’. 

Despite this, the mood is set for gains in the region with just the Yen bucking the trend, having started to lose its recent upward momentum. As mentioned previously, the gradual widening of the interest rate differential between the Yen and the other major currencies, favour its return back to the funding currency of choice. 

The resignation of the Japanese Finance Minister, Fujii on health grounds (he had been viewed as a steady hand on the tiller on the back of his considerable experience in markets) leaves a big gap in the government’s ranks ahead of an important financial period and a crucial debate on fiscal policy. 

His withdrawal from the fray also makes intervention much less likely, negating the possibility of official support for the Yen if the market does start to push it back towards 100 versus the Dollar.

The trade of the year call however is to be short Sterling / Aussie now that the strong support at 1.7700 has broken. Talk is for a move down to 1.6000 which, unless you view Cable as being a non-mover, suggests a move in Dollar/AUD down towards, but not through, the parity level. 

This backs up the argument that commodity currencies will dominate proceedings during the early stages of the year with the Aussie, Kiwi and Canadian Dollars the punters favourites.

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.

Dubai still grabbing the headlines

The Dubai furore continues and undoubtedly will do so for some time; the market seems to have contained the news with a rally in Asian stocks and US stocks steady yesterday. 

What we do know is that if Dubai World defaults then lenders will have to take the hit, however the market feels this is unlikely. As UK banks will be the hardest hit in this eventuality, then sterling has remained soft as the USD gives up its gains. Let us see if the pound can start to play catch up today- it is certainly out of the blocks well.

There were other things happening in the world although they all took a bit of a back seat. Most important was the result of and action that followed the Monetary Policy meeting in Japan this morning. Interest rates were, as expected, left unanimously at 0.1% but the market was surprised by the announcement of a Yen 10 trillion injection of funds into the economy to attempt to stave off the ongoing deflation in the country. 

The cash would be introduced to lenders and be backed by JGBs, Corporate Bonds and Commercial Paper. The Yen dipped initially, recovered a tad and then eased again- nothing substantial but a move in the right direction as far as the Government is concerned.

The Reserve Bank of Australia, as predicted, raised their official rate by 25 basis points to 3 3/4% completing a hat-trick of interest rate rises- a first for the central bank. 

The Aussie remained very quiet with both the decision and the comments that followed widely anticipated. The Nationwide BS in the UK this morning released data that indicated house prices had risen by 0.5% in November and a slightly more sustainable 2.7% on the year. 

No real reaction from the FX markets although this data will help consolidate the Pound.

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.

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Currency Converter Services at Wise Money

Currency Converter Services at Wise Money

To order your foreign exchange holiday money cash deliveries in the UK for amounts less than £4,000, $5,000 or €5,000
Or for amounts of currency over £4,000, $5,000 or €5,000 please call 0845 389 3000 and ask for a no obligation, free consultation with theexclusive Wise Money business forex service or complete the online enquiry form

Specialists in selling foreign currencies and traveller's cheques. Our travel money service offers commission free currency at highly competitive rates.

Avoid the queues, unnecessary journeys and order your travel money from the comfort of your own home or office. Then let our speedy next working day delivery service to take over to ensure your money arrives at your door safely.

Place your order before 12:30pm and your money will be delivered by fully insured special delivery by 1.30pm the next working day.

Please note: Orders received before 12:30 pm on Friday will be delivered the following Monday. Orders received after 12:30 pm Friday or placed on Saturday and Sunday, will be delivered the following Tuesday. Special arrangements for Bank Holidays will be advertised on the site at the time.

There is absolutely no service fee or commission on the currency exchange transaction. There is a £4.95 handling fee to cover the cost of delivery and insurance. Orders over £300 when paid for by debit card and bank transfer will receive free delivery please select this option in the shopping cart.

Payment can be made securely over the Internet with any card bearing the Switch, Delta, Visa, MasterCard logo or by cheque, chaps, swift.

We also supply commission free, American Express Travellers Cheques, with the peace of mind offered by free insurance against theft and loss and a 24-hour replacement service.

To order your foreign exchange holiday money cash deliveries in the UK please click here now for amounts less than £4,000, $5,000 or €5,000

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.

Australian Dollar the big winner as risk appetite continues

More positives as equities continued their bull run with the FTSE posting another gain yesterday.

The markets were boosted by further signs that the weakness in the US economy was bottoming out. US new home sales rose 11% in June far outstripping expectation- firming and improvement in the housing sector is vital to underpinning recovery.

The housing sector is a leading indicator to downturn/upturn in any economy and the news yesterday was greeted well by the markets- sustainability is still the key going forward in this sector and we are still not out of the woods but closer than ever.

As is the trend this good news led to further weakness in the USD and stocks experiencing their longest rally since 2003. The dollar index dropped to its lowest level this year and the main beneficiaries were higher yielding commodity based currencies such as the New Zealand and Australian dollar.

Other economic data affirmed that Italian July consumer confidence rose to 107.5, up from 105.4 in June, and better than the median forecast of 105.9. It is the highest read since November 2007. Meanwhile, French industry demand fell in the Q-2, but less sharply than in previous two quarters.

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Equities tumble as AIG losses shock the markets

AIG yesterday announced the biggest corporate quarterly loss in history as 4th quarter 2008 figures showed a $61.7bn loss.

The troubled insurance company is integral to insuring households and financial risk globally and would pose a systemic risk to the global economy if allowed to fall. AIG has already received support of $150bn and will now require further funding to sustain it.

The markets reacted swiftly to the news with US stocks falling to their lowest level in 12 years and the FTSE marking a slump of 5%. The bleak outlook yesterday was not helped by HSBC showing pre tax profits for 2008 down by 62% on the previous year and confirmation that it is seeking to raise 12.5bn from shareholders to help the firm through the uncertain economic environment.

The news released yesterday simply compounded the fact that the economic downturn is deepening and looking likely to continue.

The knock on effect in the markets was a huge sell off in equities and a rush to the safe haven US dollar. Sterling was sold heavily against the majors- rapidly falling towards 1.40 against the dollar and retracing to 1.11 against the euro.

Thursday will confirm the decision on interest rates for the Bank Of England and the European Central Bank; it is expected that both central banks will cut rates by up to 50 basis points.

Interestingly the Bank of Australia kept rates on hold at 3.25% last night, citing confidence in recent policy easing and stimulus packages as being sufficient to maintain confidence in the economy. Could we see a similar stance from the BOE or ECB on Thursday?

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Interest rates announcements due soon

Despite the fact we are heading into the Bank of England'€™s rate decision tomorrow Sterling is holding up pretty well.

There is no doubt Sterling has a lot of in built bad news already in the price and a 0.5 % base rate cut is already priced in some may even argue that 1% is already accounted for.

On the other hand the ECB still stubbornly refuse to move their interest rate down from 2% and tomorrow we expect unchanged.

Short term GBP EURO could move lower on the back of the widening interest rate differentials, however the continuing downgrading of Euro Zone growth forecasts can only mean further pressure on the Euro and Sterling could be the main benefactor of this.

In the US the Obama effect looks like it could be running out of steam and the US$ will come under pressure as the Treasury struggles with its exploding balance sheet.

The short term rally we saw in the Australian Dollar has also fizzled out as the market comes to terms with what could be a protracted slowdown down under especially as the price of commodities continues to fall.

And over to Russia the fun continues as the Central Bank desperately tries to hold up a freefalling Rouble, a thankless task and this is also putting pressure on Poland and Hungary as their currencies get drawn into the global risk aversion play and continue to fall.

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Snow dominates news

The Met Office is also predicting more white stuff to come later in the week, falling on top of the ice rink that used to be roads and pavements.

Wall Street dropped yesterday after the opening bell as concern over the fate of the stimulus package and the economy weighed on sentiment. Stocks pared their losses, however, as the manufacturing ISM data was reported better than expected.

Financial stocks led the index lower amid worries that the "bad bank" plan is faltering. This factor, added to the uncertainty of the fate of the stimulus bill caused Treasuries to strengthen with term LIBOR rates rising to 3-month highs.

The rally in treasuries came as something of a relief to the market following last week's flood of new issuance ($ 135 billion worth) which had pushed longer yields up by 20 basis points.

The Treasury will announce its latest quarterly refunding today and release the size for the 3y, 10y and 30y issuance for next week. Also next week, as reported in today's press, the new Treasury Secretary Geithner is expected to lay out plans for the financial rescue package.

Given Obama's recent assertions that he wants to prevent more foreclosures than are absolutely necessary and his warning that "more banks will fail" before this crisis is over, means that the speech will attract evn more attention from the market.

Elsewhere, the Reserve Bank of Australia cut rates by 100 basis points last night to their lowest level since 1964 and announced a further A$ 42 billion stimulus package for the beleaguered domestic economy.

Australia has suffered greatly at the hands of reduced global demand for its mined resources, especially from China who were the major consumer of the country's raw materials.

The Aussie had a bit of a wobble but in the end firmed up on relief that the cut wasn't greater. Having said that, the central rate is still at a heady 3.25% which leaves plenty of room for additional cuts to come.

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.

Pound weakens as inflation data weaker than expected

The Pound touched its weakest level in more than a month yesterday against the dollar and euro following a report showing that UK inflation slowed, making it less likely that the Bank of England will increase interest rates. The central bank will release new forecasts for inflation and growth this morning.

The euro gained yesterday, following strong data showing growth in the eurozone and positive data in a survey of German business conditions. Eurozone gross domestic product expanded 0.9 per cent in the fourth quarter, moving the annual rate to 3.3 per cent.

In Germany the ZEW investor confidence survey pointed to a pick-up in the economy later in the year once the impact of value added tax in January starts to wear off.

U.S. retail sales are released today and they are expected to have risen for a third successive month in January as Americans redeemed holiday gift cards and took advantage of lower fuel prices. Sales are forecast to have increased by 0.3 per cent in January after a 0.9 per cent in the previous month.

The figures may show that the economy is growing at a moderate pace, a description Fed chairman Ben Bernanke is likely to share when he begins his testimony and Fed policy report later on today.

The Australian dollar jumped in early trading this morning following a rise in US trade deficit and strong European economic growth worked in the currencies favour.

Gold firmed early this morning but hovered below a seven-month high hit yesterday above $668 an ounce, as traders turned to currencies for direction ahead of direction ahead of Fed Chairman Ben Bernanke’s congressional testimony.

Oil prices eased this morning as traders focused on the approaching end of winter ahead of U.S. inventory data, and took profits from gains driven by the International Energy Agency’s forecast for higher 2007 demand.

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.