Sterling holds steady for now

Not much movement overall by Sterling as the markets paused on selling the Pound. 

This morning we have in fact made some gains back and as we stand we are holding just above the key 1.10 level and 1.50 on GB Pound/US Dollar The 1.50 level on GBP/USD is a crucial level to hold above and will help to steady the ship and prevent further selling pressure. 

This morning we have seen UK PMI data come in much stronger than expected rising to 58.40 compared to the 55 expected and giving the best reading for over 3 years. 

On top of this consumer confidence rose to 80 and a 2 year high as consumers look ahead to a brighter 2010 for the UK economy. The good data this morning was a huge breath of fresh air for sterling giving it a welcome break from the selling momentum.

EUR/USD has picked up this morning beyond 1.36 following the leaked news of an austerity package for Greece totalling 4.8 billion euros. 

There is still uncertainty on the level of support that Greece will receive from the EU and the Greek PM tactically said that the cabinet may turn to the IMF if the EU does not give support. Nice move. If we get further clarity on the level of EU support then this should lift the euro further. 

In addition it will help lead to selling pressure on USD and the JPY and hopefully boost the Pound as confidence improves.

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Sterling crashes through 1.50 to US Dollar

After being sold aggressively across the currency markets yesterday the markets have taken a breather and we now await the next move. 

The political focus with the opinion polls over the weekend indicating that the chances of a hung parliament were much higher. A hung parliament may actually prove successful, however the markets do not like uncertainty and the consensus is that a coalition government will have less political clout to push through the decisive decisions especially in relation to tough fiscal planning which is inevitable.

The Conservatives have come out of the traps today stating that protecting the AAA status is central to their plans- however some feel their proposed aggressive cuts will be detrimental to recovery. 
 
On the other hand Labour propose to wait and cut later but waiting too long could mean that the horse has already bolted and the AAA rating could be lost. So this uncertainty and division is leading to a weaker pound. 
 
Yes this could be good for the UK economy and for recovery but there is a fine line between a weaker pound and the loss of confidence in Sterling and the UK economy- this would lead to a sharp rise in import prices and inflationary pressure especially if commodity prices remain high- not good; this would spill into a pressure on the UK gilt markets and inevitably the UK losing the AAA rating adding yet more pressure. 
 
So you can see the problem that uncertainty is creating. The Pound needs to get back above the psychological 1.50 level against the US Dollar. 

Sterling also lost yesterday on the purchase by Prudential of AIG’s Asian business which led to further selling of GBP and buying of USD in the light of this purchase. 

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US to maintain low loans interest rates

Not a surprise but the markets appreciated the confirmation from the FED which removes any potential near term surprises from the Fed. 

Equities picked up on the news but risk appetitie is far from returning. Europe came back to the fore and this morning the markets are in a tailspin of fear again as the threat of a sovereign downgrade looms over Greece. 

This opens up the possibilty of Grrek bonds being illegible with the ECB, making it more difficult to borrow.

The Yen is flying in the markets today and has pushed below 89.50 against the USD and pushed GBP down to 136.82 as we stand. The Yen is being favoured as a safe haven after recent strong economic data; the USD has also experienced gains again today with EUR/USD dropping as low as 1.3449 and GBP/USD to 1.5270 a new 9 month. 

Big day tomorrow for sterling in the revision of the Q4 2009 GDP- it is expected that it will be revised up to 0.2% from 0.1%- we need as expected or better to stave off further sterling selling. 

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Sterling exchange rate lowers against the US Dollar

Fiscal concerns and the contining dovish stance from the MPC continue to weigh on the Pound. 

Throw into the mix increased political uncertainty with the narrowing of the polls and the future does not look bright for the Pound. 

Today we had members of the MPC commenting on the quarterly inflation report where the bank lowered its growth and inflation forecasts underlining a dovish stance on monetary policy. 

King was his usual cautious self and highlighted the fragility in the UK economy and reaffirmed that inflation is likely to come down later in 2010. On the deficit he did note that we have a very large fiscal deficit and that rating agencies are to remain "somewhat uncertain" until the deficit is tackled. 

King affirmed that he would be immensely surprised if rating agencies downgraded the UK.

Another MPC member David Miles noted that the decision not to raise QE was very finely balanced and this has contributed along with the dovish tone overall to sterling slipping 1% against the USD and over 0.5% against the euro.

Later this week we have important feedback in the form of the second revision of UK GDP and also important numbers from RBS and Lloyds- especially critical due to the government involvement. 

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UK jobless data worse than expected

UK jobless claims were up 23,500 against the expectation of a fall of 10,000 for the employment sector. 

This data for January was disappointing but not wholly unexpected and simply reinforces the fact that the employment sector remains very sluggish. Although we may have officially exited the recession on paper the reality is that we still have a long a painful road ahead.

The official unemployment rate remains at 7.8%. In addition to the employment data we also had the minutes from the February interest rate meeting for the UK. 

The BoE minutes came in 9-0 as expected to keep interest rates and QE on hold. Although all members voted to leave the size of the asset purchase programme unchanged- it was noted that some members felt the arguments for a further increase were "finely balanced". 

This underlies the uncertainty within the MPC on the future impact of the £200 billion already introduced and therefore the MPC will not close the door on further QE if required.

Sterling is likely to remain subdued as the BoE feel that inflation will fall further in 2010 and further expansion of QE is a weapon that they will use again if necessary. 

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Volatility is the name of the day

A good start for Sterling quickly turned sour as fear once again gripped the markets by the throat. 

A lack of action points on the Greece situation certainly did not help matters, however other factors also conspired to turn the markets away from risk. 

A big factor was the decision from the Chinese central bank (PBOC) that it was once again raising its reserve requirements by another 50 basis points. The decision to do this is to cool the rapid pace of credit growth in China which is unsustainable.

The monetary tightening will hurt global growth sentiment as China is the key driver for global recovery; in particular Australia will suffer. 

The news led to a sell off in the AUD, GBP and the EUR; the negative vibes were not helped by weak Eurozone data this morning with GDP coming in at a lame 0.1% against the expectation of 0.4% and a decline of -1.7% for Industrial Production.

Given the mood in the markets we can expect to see more selling pressure on EUR/USD and GBP/USD…later today we have US retail sales- a +0.4% is expected and a good number is need to help lift the cheer in the markets. 

EUR/USD at 1.35 is a key level to watch out for and if broke should enforce further downside momentum. Sterling has benefited on the weakness in the euro pushing beyond 1.15 again.

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Greece- is there a deal or not?

EU leaders are meeting today in an attempt to lay the foundations for a deal to rescue Greece. 

Lots of speculation already touted this morning. There has been talk of IMF assistance and then IMF involvement without funding. Germany and France are widely expected to shoulder most of the responsibility in supporting Greece. 

The most recent feedback is that aid for Greece will depend on Athens meeting its deficit reduction targets this year- begs the question- what if they do not? 

Lots of fence sitting which is still leaning to reduced confidence in the markets and associated strength of the safe haven currencies such as the USD and the YEN. Expect more volatility as more news and feedback filters through.

Sterling is suffering from a hangover today after a little too much of Mervyn King yesterday. 

The Bank of England governor killed off the rally in sterling by leaving the door open for a further expansion of the QE programme. However it was not all doom and gloom from King who dismissed fears that the UK would lose their AAA credit status. 

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Euro bashing rests for porfit taking

However the pause in its recent decline is more to do with profit taking than a reversal of the currency’s fortunes. 

Today's Financial Times suggests that £7 billion of short trades are weighing against the eurozone's immediate currency prospects.


We did see both Euro and Sterling hit 8 month lows overnight as the Asian markets rushed to buy the perceived safe haven US Dollar but once again, proximity to support levels was enough to bounce both rates as Europe entered the fray. 

The concern for Euro bulls is that recovery attempts seem very limited in scope and small in magnitude. 

The rally for the single currency in the US last night was snuffed out by the combination of a late sell off in equities and an expectation that Bernanke’s testimony this evening could very well signal a more hawkish Federal Reserve outlook, with speculation that he might lay groundwork for a tightening of monetary policy.

Yesterday’s markets, outside the late US fluctuations, were largely extremely boring with traders waiting for developments (either good or bad) on the Eurozone Sovereign issue. 

Nothing much happened. The Spanish Finance minister was in London talking to bond holders and the Portuguese and Greek governments were both vocal in their defence of their respective fiscal positions Data again is light today with UK trades and US wholesale inventories the highlights. 

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Sterling strengthens to 1.15 against the euro

Sterling is continuing its rally against the weak euro but has fallen back against other major currencies. 

GBP/EUR is pushing up and has already hit the key 1.15 level in trading today as the euro is pummeled against the major currencies. The move higher for sterling is more related to euro weakness this morning as risk aversion is back in play on further concerns surrounding Greece. 

The failing on the sterling Bull Run against the USD was fuelled by renewed concerns raised by Fitch the credit rating agency on the UK’s fiscal deficit coupled with a blunt warning from Mervyn King on the health of the UK economy. 

Alistair Darling again repeated the need to cut the deficit but the rating agencies are focusing on changes introduced and not to be introduced- the general feeling is that the pre-budget has not gone far enough.

Focusing on UK data we have seen jobless claims come in better than expected and the official unemployment rate has fallen to 7.8% from 7.9%- very good news. 

No surprises from the BoE in their minutes as the MPC voted to keep rates and QE on hold with a 9-0 decision. They also indicated that yesterdays surge in CPI is most likely a blip and CPI levels should wind lower in 2010 and the February inflation report will offer more clues on the real status of inflation. 

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Sterling continues to stride ahead in 2010

Another bright start for Sterling which continues it's gains. 

Sterling hit a 6 month high against the euro and pushed higher against the USD. The move was initiated with the acceptance and recommendation from the board of Cadbury’s on the offer by Kraft. 

The Kraft offer values each Cadbury’s share at 840p and shareholders will be entitled to receive 10p per share in the form of a special dividend. Sterling gained on the back of the expected benefits from the M&A flows of the deal. 

Then at 9:30 official UK inflation data came in much better than expected- UK December CPI has come in at +0.6% month on month, +2.9% year on year, demonstrably stronger than median forecasts of +0.3%, +2.6% respectively. 

This has raised the prospects for a Bank of England interest rate rise in 2010 and it certainly offers the Bank of England something to think about in early Feb.

This data also heightens the view on the UK employment data later this week- better data here could reinforce the view that the UK is firmly on the road to recovery. 

The Pound hit a high of 1.1455 against the euro and 1.6457 against the USD before falling back from the highs- Mervyn King is due to speak later and the market will expect a cautious approach which could take the edge off sterling- we will see later..

The Euro is under pressure this morning as the fallout in Greece continues to undermine the single currency and in addition the German ZEW came in weaker than expected for the third month in a row. The euro is closing in on key technical levels against the USD and the EUR with EUR/USD close to breaking below 1.4275 and GBP/EUR targeting 1.15. 

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Big week for Sterling ahead

A very good work for Sterling last week as it pushed higher against the major currencies. 

The push on sterling was largely attributed to improved economic data leaning to a more positive outlook for the UK economy. In addition the National Institute of Economic and Social Research (NIESR) estimated that UK fourth quarter GDP which is due out next week will come in at +0.3%- so therefore the UK will be out of recession! 

The upbeat assessment was mirrored by MPC member Andrew Sentence who commented that the Bank of England may need to raise interest rates this year. So will this good run continue this week?

Hopefully so. We have a plethora of economic data and feedback this week from the UK economy which could galvanize sterling further. 

We start on Tuesday with the Consumer and Retail price index which is a gauge on inflation for the UK- the expectation is that the measures will show an increase in inflationary pressure which will add further to the probability of a rate rise in 2010. 

Following this we have the Bank of England minutes which may offer an insight into the cessation of the Quantitative Easing programme- possibly as early as February. Following this we have retail sales and jobless data followed by public finance data. 

So a big week for the Pound and if we get more positives than negatives we could see a stronger Pound ahead of the official release of Q4 2009 GDP next week. Watch out for the public sector net borrowing data and M4 money supply which could trip up the pound if worse than expected.

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Euro rumours the centre of attention

Following yesterday’s potential minefield that was the ECB meeting, the market mover today was a rumour that went round the Far East in the early hours that the German Chancellor, Merkel, was ready to resign her position. 

This appears to stem from a report in Time magazine that was negative on the support that Frau Merkel is currently receiving. This rumour was swiftly denied by a German Government spokesperson but the damage was done and the Euro dropped sharply all round. 

In fact the move was then compounded as traders re-visited the comments from Trichet in his post-ECB policy meeting press conference.

Although he had said, when grilled by the reporters about Greece’s debt problems and the possibility of the country dropping out of the Euro, that he did not comment on ridiculous hypotheses, the whole question of Eurozone sovereign risk and the support that namely Greece, Portugal and Spain currently enjoy, was brought back to the table.

Sterling enjoyed a good spell and with the 200-day moving average at around 0.8850 being breached, traders saw a raft of stops taken out and a quick dip down to the 0.8825 Euro technical support. 

A weekly close beneath 0.8825-30 suggests a move lower towards 0.8500 but I feel that this is a move too far. The whole Greek/Portuguese situation has been overdone and it would not surprise to see traders looking at current rates as an opportune level at which to re-establish Euro long positions.

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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?

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Financial markets lack direction

Yesterday we saw a bout of US Dollar selling pushing EUR/USD back to 1.45 and supporting the Pound in a run up towards 1.62. 

This ran out of steam in later trading as the markets became range bound with this pattern continuing so far today. Data from the UK today showed a reduction in the trade deficit and overnight we saw BRC retail sales come in at +4.2% year on year; both data better than forecasts. 

However it was not all good news for the UK as RICS December house price balance came in at +30 from +35 in November- the expectation was for +36 and this was the first drop since Feb last year.

Overall we have seen more positives coming from the UK data snaps and this should bode well for the Q4 2009 GDP data.

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Sterling strenghtens on positive news

Sterling finished last week as it started in a positive tone.

The Pound has pushed through 1.60 against the USD and towards 1.12 against the Euro. The gains are largely due to the feeling that the Bank of England will end the Quantitative Easing programme in next months MPC meeting. 

The general sentiment is that UK GDP will come in positively at the end of this month and this will lean the Bank Of England to pull the plug on the life support for the UK economy. 

On top of this sterling has gained on the back of the latest opinion poll from the Sun which emphasizes an extended lead for the Conservatives after the failed coup to oust Brown. 

This is significant as it decreases the possibility of a hung parliament which would be sterling negative due to the lack of a majority to clearly define fiscal objectives. Expect more sentiment shifts before the Feb MPC meeting which will be significant; yesterday as expected there were no surprises in the MPC meeting for the UK with the interest rate and QE held.

The Yen remains in the spotlight as the market adjusts to the new finance minister Naoto Kan. Mr Kan is the polar opposite to the previous finance minister Hirohisa Fujii and favours a weaker yen.

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Sterling kicks off 2010 in bright form

As usual, the trading periods between the Christmas and New Year holidays threw up some sharp moves, especially in the Dollar/Sterling cross, with one 24-hour session seeing cable trade up from 1.5850 to 1.6225 before settling back down below 1.6100. 

The few Banks still operating certainly enjoyed themselves. Today we start with Sterling looking relatively firm and the Yen soft. Euro/Dollar, which didn’t experience the more extreme moves seen in cable, remains in the mid 1.43s. 

The Yen has been the weakest currency over the last month since the newly elected government embarrassingly forced the Bank of Japan to change its established tack and boost QE whilst expanding fiscal spending. This has renewed appetite for using the Yen as a funding currency and with expectations that interest rate differentials are set to widen against the Japanese currency, this trading trait looks set to grow, to the Yen’s detriment. 

An article in the Wall St Journal today gives reasons for caution as we enter 2010, singling out the UK as having the worst fiscal position of all the industrialised nations, noting that, unlike several other headline grabbing countries, the UK does not have either an implicit or explicit guarantee from a friendly nation that stands behind its debt should things take a turn for the worse. 

Given that PIMCO (Pacific Investment Management Co), which runs the largest largest bond fund, have announced that it is cutting its holdings of both UK and US government issues owing to the spiralling debt burden in both countries, it suggests that Sovereign standing is going to be the focus going forward.

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Euro even weaker than Sterling

The euro has again moved lower against the majors and in particular against the US Dollar moving down to 1.4523 overnight and overall down 500 points from recent highs. 

The cause of the downturn has been attributed to the recent jitters in Greece and more recently in Austria. 

The Greek prime minister commented yesterday that Greece does not have much time and must take tough decisions within the next three months- decisions that have been left for decades.  

In a very direct address he stated that “we must change or sink” and vowed that he will tax the bonuses of Greek bankers by 90%- move over Alistair Darling!

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Markets dry up for Christmas

As we get into December, so markets become less and less liquid.

This, combined with the lack of any significant data on Friday, left the technical traders very much in charge. 

Euro/Dollar obeyed the charts almost to the Nth degree with the closing support at 1.4610 holding even though we had seen slightly lower in late afternoon trading. 

Having broken the early November low of 1.4626 we are left with some fairly definite support and resistance levels to look at between now and the end of the year. 

There has been a considerable amount of trade around the 1.4700 level and this looks to be the initial Euro resistance level with last week’s high of 1.4780 the next resistance level. 

In a nutshell, if we don’t back up through 1.4800 in the next few days then the downside beckons. 

Recent moves suggest that short term trading will focus on being short of Euro with a target of 1.4450/1.4500 on the cards. This directional trade has been given impetus by what appears to be an improving relative economic performance from the US, which is in turn giving the Dollar a modicum of support.

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Darling does nothing to repay his overdraft

So the pre-budget came and went yesterday and the economists and the politicians digested it in earnest. 

Naturally there was a heavy focus on the report due to the impending election and also the dire health of the UK economy. We saw a one-time 50% tax on bank bonuses that exceed £25,000- this expires on April 5 and does not include contractual agreements…lots of bonus payments to be made on April 6 then! 

Hard to know the intention here as it is easily sidestepped and avoidable and not likely to raise a jot to reduce the deficit or deter the bonus culture going forward.

From a market perspective other measures including an increase in National Insurance and a public sector freeze on pay limited to 1%, leave the ability to reduce the deficit in half within 4 years looking very doubtful. 

Sterling has not reacted too badly however but going forward I feel the words “deficit”, “credit rating” and “downgrade” will be heard more and more to the detriment of sterling.

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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

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Sterling the star performer yesterday

Sterling was the belle of the ball in the currency markets yesterday gaining 1% against the US Dollar and the euro.

The positive trend was started wit the news that CPI data for the UK (a key indicator on inflation) came in unchanged at +1.8%. Although the inflation level is still below the 2% target a drop was widely forecast.

This was especially true against the BoE raising the QE programme by £50 billion and the feedback from the quarterly inflation report which noted that inflation was set to fall below 1%.

Sterling jumped on the news as the market digested a less dovish underlying data snap than the sentiment preceeding.

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Foreign exchange markets take a breather

Mostly sideways trading yesterday as Sterling and the euro failed to advance further against the US Dollar.

We did see a test of the key 1.70 level but if you blinked you may have missed it. US equity markets also struggled to find a direction swinging between gains and losses with the Dow Jones finally ending slightly up.

A pause is probably sensible now as news may materialize that the optimism is not warranted and the overheated markets will quickly retreat. We have a three-pronged event risk this week as we have the monthly BoE and ECB meetings on Thursday and also the payrolls report on Friday from the US. It seems the market will await further direction from these event risks.

UK July services PMI has come in at 53.2, up sharply from 51.6 in June, some way better than median forecast of 51.8. UK June industrial/manufacturing output data has come out at +0.5% m/m and +0.4% month on month respectively, stronger that median forecasts of flat and -0.1%.

So good news flowing from the UK economy this morning but the markets are yet to sustain a move above 1.70 on the USD or 1.18 on the euro.

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Sterling tops out at 1.65 again against US Dollar

In the last few weeks we have seen a number of attempts to breach 1.65 on GBP/USD and every time the market has failed to hold above this level.

A similar pattern has emerged in USD/JPY which has struggled to hold over 95. In the last four trading days we have seen a tight trading range for GBP/USD which is unusual in the light of the volatility in the last few months.

Today we have a few data snaps in the calendar for the UK which could shake the markets back into life. We have UK mortgage approvals, consumer credit, net lending and M4 money supply out this morning.

Yesterday the USD strengthened against the pound from over 1.65 back to 1.6350 and from 1.4280 down to 1.4108 against the euro. US stock markets fell more than 1% and this helped swing money back into the USD. US economic data supported the trend into risk aversion as consumer confidence fell from 49.3 to 46.6, the lowest level in 3 months.

The S&P/Case-Shiller home price index fell 17.1% in May- this is the main measure of US house price movements. In addition US corporate earnings were shaky and Bank of America announced that they will be shutting 10% of branches signaling further lay offs.

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UK GDP weaker than expected

Sterling started strongly in early trading moving towards 1.6550 on the USD, 1.1650 against the Euro and testing 157 on the Yen.

We then had the release of UK second quarter GDP which gave sterling a cold shower dropping a full cent against the USD and slipping against most other currencies.

The GDP number came in at -0.8 against a forecast of -0.3- this brings the year on year fall to -5.6% and is the biggest year on year fall since records commenced in 1955.

The USD strengthened a little yesterday following comments from the Fed that they may not actually need to buy all of the bonds that it previously announced- this is effectively reining in the Feds QE measures.

If we look back as to the level of weakness that the USD experienced on the announcement of the fed printing money- we saw a move from 1.29 to 1.47. Similar hints sprung from the Bank of England as MPC member Andrew Sentence said that the MPC could pause it’s bond-buying program- this added support for sterling.

Other data out today came in positive for Germany as PMI data was stronger than expected at 45.2- up from 40.9 in June in manufacturing and 48.4 from 45.2 for services. French PMI was mixed as manufacturing improved but services dropped.

The main mover in the markets yesterday was the Japanese Yen which retreated against the USD, EUR and GBP. It seems Japanese investors are now looking at overseas assets and yield as confidence in the markets improves. GBP/JPY is up from 148 last week to 156 this morning.

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IMF warn on UK finances

A cagey day in the markets yesterday as mixed data prevented any dominent trend in the currencies.

Sterling struggled to make a push for 1.65 against the dollar as news that CIT would likely head to bankruptcy maintained a cap on the bulls. In the US we saw data from Initial jobless claims and continuing claims which both came in better than anticipated.

However the fall in initial jobless claims was attributed to seasonal factors and therefore not taken as a bullish number in the markets.

Instead the markets focused on corporate earning figures and yesterday we saw good numbers from JP Morgan, IBM and Google; this helped to stage a late rally in equities with the Dow Jones Industrial Average rising 1.1%.

In the FX markets this would normally lend to selling pressure on the USD and the YEN, however we have opened this morning with the USD and Yen stronger.

In Asian trading the markets again turned nervous and the pound was dented by the YEN and the USD in particular. Feedback from the IMF focusing on the health of the UK economy did not help the pound.

The IMF suggested that extra capital would be required by UK banks if the economic situation declines, in addition there was also a warning for Gordon Brown that a ‘credible plan’ was necessary to sure up the public finace position- the word credible denoting that political rhetoric will not wash and clear action was required.

In a damning assessment the IMF stated that “Market conditions suggest the UK has been getting the benefit of the doubt, both in the Government bond market and also the foreign exchange market,” and “This benefit of the doubt is not going to last forever and it’s going to be important that the Government does not test the limit of the market’s confidence”.

Confidence in the markets was also shaken by news of the bombings of 2 hotels in Jakarta with reports of 9 dead- this lifted the USD and the YEN.

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Markets resurgent as investor spirits rise

Hopes that the global slump is ending and that recovery is taking firm hold have been reinforced as markets enter the second half of the year on a high after sharp gains in the past quarter.

Stock markets in the West have leapt over the past three months, as upbeat investors bet on a global economic resurgence.

The Pound has also fought back from steep losses as optimism grows that Britain’s recession will end soon. Sterling’s overall value is up by 10 per cent over the past three months.

Investors’ rising spirits are emphasised by a jump of more than two fifths in the MSCI World Index of stock markets across leading economies since it plumbed a low on March 9. The index has racked up gains of more than 20 per cent in the past quarter, registering its best showing since 1998.

In London, the FTSE 100 index has rallied by more than 9 per cent in the past quarter and stands 22 per cent above its nadir reached on March 3. Markets succumbed to a bout of jitters yesterday, however, as the exuberance was challenged by George Soros, the billionaire speculator.

Disappointing economic news underlined the fragility of recovery prospects, helping to leave the FTSE down by more than 1 per cent on the day. The Dow Jones industrial average also suffered a fall of about 1 per cent.

Mr Soros predicted that the United States would endure a “stop-go economy . . . As markets revive, fear of inflation will drive up interest rates, which will choke off recovery,” he said.

Nervousness that Britain’s upturn could be weak and prone to stall was fuelled by GDP figures showing a far steeper first quarter (Q1) slump than previously reported. The economy is now estimated to have shrunk by 2.4 per cent, its worst contraction for 50 years, rather than the 1.9 per cent officially estimated a month ago.

The figures revealed a far graver decline in the services sector, by 1.6 per cent, against a previously reported 1.2 per cent contraction.

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.

FTSE 100 goes into deep freeze

Markets have been quiet in the past but this morning is almost something different.

In two hours of trading the FTSE has managed to excite absolutely nobody at all after the Dow and S&P went into deep freeze yesterday evening.

With volumes draining away as dealers head off to the beach, there is a good chance that the current moribund conditions will continue for quite some time.

Watching the charts is rather a frustrating pastime, as even small moves look huge due to lack of any major scale with which to compare. The FTSE 100 has now been stuck in a 100 point range for seven sessions and today does not look like changing matters.

One ray of hope is that the Pound has gone for broke this morning and busted straight out of the recent trading ranges.

The 07.00 to 09.00 (UK time) trading period is becoming quite interesting, as Europeans turn on their screens and hammer the market one way or the other.

The high this morning at $1.6742 has been opposed quite strongly since it was hit at 07.21 this morning and we have slipped back to $1.6650ish with punters getting heavily short all the way up.

Those who have dealt with sufficient margin to avoid being stopped out on the way up may be hoping for a nice price correction back into the $1.6200 to $1.6550 trading range, but if we do not get back down there today the chances of a new range being set up are quite strong.

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.

Bank pours cold water on economic recovery

The Bank Of England is sceptical about the so called recovery in the economy it emerged today as minutes of its June meeting showed it was united on a decision to keep rates on hold.

Minutes from the Bank's meeting two weeks ago revealed the nine member monetary policy committee unaminously voted to keep rates at their historic low of 0.5 per cent.

The Bank conceded that there had been "positive developments" in the economy over the month and that "the risk of a continued sharp contraction in output in the near term had receded."

However, it indicated that a spate of more upbeat recent economic data about the services, industrial and housing sectors gave less reason for optimism than business groups and commentators have suggested.

"Even if developments over the month had been positive, the increase in confidence apparent in some financial market indicators and some household and corporate sector surveys remained fragile," the minutes said.

"There was no reason to conclude that the medium-term outlook for the economy and thus inflation has changed materially since the Inflation Report had been finalised."

Last week, the Pound surged to its highest overall levels this year as hopes that the British economy is emerging from recession continued to burgeon.

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UK inflation falls less than expected to 2.2%

UK inflation fell by much less than expected in May, lengthening the odds of full blown deflation, official figures revealed today.

The consumer prices index (CPI) measure of inflation, the Bank of England's target measure, dropped to 2.2 per cent from 2.3 per cent. Analysts had expected a fall to 1.9 per cent. This is the 20th consecutive month it has been above the Bank's 2 per cent target.

The alternative retail prices index (RPI) inflation measure, which includes housing costs and upon which many pay deals are based, has already plunged into deflationary territory. But it delivered another surprise, edging up from -1.2 to -1.1 per cent last month on the back of rising mortgage rates, confounding economists' expectations of a further drop to -1.5 per cent.

In another sign that prices are rising, core inflation, which strips out volatile energy and food costs, also rose from 1.5 per cent to 1.6 per cent.

The increased price of cigarettes and alcohol, which rose as part of April's budget, helped to push inflation upwards, the Office for National Statistics said, but significant increases came from the rising cost of DVDs, televisions, clothing and footwear- indicating that sterling's weakness is filtering through as foreign made goods become more expensive.

However, policymakers and analysts still expect inflation to fall sharply over the coming months.

Sterling jumped by 0.6 per cent against the dollar to $1.6414 after the figures were released, and rose to the highest level this year against the euro, which fell to 84.44 pence against the pound.

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Wise Money lifted by jobs data

Markets climed higher in early US trades as the latest report on jobless claims turned out to be better than expected and retail sales improved.

The Dow Jones was up 62.13 points at 8,801.15 at midday in New York, the S&P 500 was up 8.57 at 947.72, and the Nasdaq was up 11.48 at 1,864.56.

A Labor Department report showed first-time jobless benefits claimants fell to 601,000, better than expectations. The Commerce Department said retail sales increased 0.5 per cent in May after two months of declines.

The FTSE 100 index closed up just 25.12 points higher at 4,461.87 as banking sector gains were offset by falls in commodities.

Oil companies retreated after recent gains, despite oil prices rising for a third day, above $72 a barrel and hitting an eight-month high in New York on the back of a larger-than-expected drop in US crude inventories.

Findings from the National Institute of Economic and Social Research (NIESR), the leading economic think-tank, that the UK economy could emerge from recession soon gave strength to the pound.

Sterling climbed to its highest level in more than six months to reach €1.174 compared with €1.167 previously.

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Pound rises three cents to $1.64

The Pound rose 3.03 cents against the dollar yesterday as a survey indicated the British manufacturing sector could stop shrinking by autumn and hopes were lifted that the worst of the recession was over.

Sterling closed up at $1.6428, the highest level since October 21, and 20pc higher than its lowest 2009 level in January. It also rose 2 cents against the euro yesterday to close at €1.1602.

The pound was helped by the publication of the latest manufacturing Purchasing Managers' Index (PMI), which signalled a better-than-expected improvement in the sector in May.

The PMI rose to a 12-month high of 45.4 in May, up from 43.1 in April. It has been rising sharply since hitting a low of 35.1 in February. A figure below 50 marks a contraction in activity and above indicates a rise.

Production and new orders fell at the slowest rates for 12 and 14 months respectively, with larger companies faring better than small and medium-sized businesses.

Particularly encouraging was the new orders balance, which rose to 48.9 from 46.1 in April, which is likely to trigger a process of restocking following a period when manufacturers rapidly ran their stocks down to reflect the fall in demand.

However, new export orders fell at a faster pace in May, measuring 45.3 on the PMI compared with 49.5 in April. It is further evidence that a weaker pound in 2009 has so far failed to boost exports significantly, as demand in Britain's key export markets remains subdued because of the global recession.

Unemployment in the sector continued to rise in May but the pace of job cuts slowed, with the PMI employment index rising to 38.9 from 36.1 in February. Unemployment in the UK as a whole is expected to rise above 3 million in 2010.

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Sterling hits six month high against the dollar

Sterling reached its highest level against the dollar in more than six months as it took strength from an improved outlook for the global economy.

The UK currency closed at $1.6155 having earlier reached $1.6183 - on track for its biggest monthly gain since 1985.

Positive economic news from Japan and Germany, sent the dollar tumbling against a basket of currencies.

US stocks traded mainly flat after enjoying a promising start to the session with the release of data from the US Government which indicated that the recession could be on the turn.

Further data dampened earlier optimism with the Institute of Supply Management Chicago showed US midwest business activity slowing severely in May. Another survey showed consumer confidence in May was at its highest level since last September.

Government figures had earlier revealed that the US economy contracted slightly less than estimated in the first quarter. Corporate profits rebounded.

Gross domestic product, or total goods and services output within the US, dropped at a 5.7 per cent annual rate, the Commerce Department said, less than last month's 6.1 per cent government estimate. The economy contracted by 6.3 per cent in the fourth quarter.

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Sterling buoyed with positive house price data

Lots of positives in the global markets this morning and for sterling.

Firstly we have seen the Nationwide House price index survey show a surprise bounce as the average house price rose 1.2% in May- this is the strongest monthly gain for 19 months.

Although this is a good indicator that the severe downturn in the property market may be bottoming out- Nationwide noted that it is still too early to call as unemployment is still rising and credit conditions remain tight.

Sterling was also buoyed by UK consumer confidence matching its highest level in 11 months reported market researcher GfK NOP…the CBI also reported that business sentiment rose to the highest level since 2007.

Sterling is now pushing towards 1.61 against the dollar (a new 2009 high) and 155.00 against the Yen- we could see new yearly highs very soon on the EUR and for sterling on a trade weighted basis.

In the wider markets we have seen more leveraging into Oil and Gold which both rose sharply- Gold is closing in on $1,000/oz again and Oil has hit a new 6 month high above $65 a barrel. Commodity prices have leaped this month as a move out of the dollar and Yen mirrors the improved confidence and a move from safety to investments.

We have seen major gains in commodity based currencies particularly against the USD- with the CAD, AUD and NZD all making gains this month.

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What a difference an "A" makes

Yesterday we saw incredible volatility in the markets as firstly Standard & Poor’s said it was revising its outlook for Britain’s AAA credit rating from "stable" to negative.

This had a whirlwind effect on the markets with the FTSE falling nearly 3% and sterling tumbling across the markets. Official data showed that the treasury borrowed £8.5 billion last month and the S&P warned that the debt rating would be downgraded if the next governments’ fiscal plans do not show a secure downward trajectory in the medium term.

A downgrade would be a huge blow to the status of Britain and would lead to the Treasury being required to pay higher interest on future borrowings. Sterling weathered the initial dip of 2% against the US Dollar and 1.5% against the Euro and retraced back to earlier highs of 1.58 against the USD in later trading and gained some of its losses back on the Euro.

Moody’s later informed the market that they had no plans to change their current rating of AAA and stable helping the pound. The response from the UK government and head of the DMO affirmed "There are significant uncertainties in the global economy at the present time and S&P point out that the outlook could be revised back to stable 'if fiscal outturns are more benign than currently (they) currently anticipate'," – let us hope Mr. Darlings growth forecasts are correct!

Sterling’s gain back against the US dollar was also helped by worries that the US will eventually face the same fate of a credit downgrade with its spiraling budget deficit and weakening economy.

Bill Gross the co- CEO of PIMCO a large bond firm told Reuters that investors fear the US is "going the way of the UK-losing AAA rating, which affects all financial assets and the dollar", the growing fears sent the dollar tumbling as risk aversion encouraged investors to seek new harbours- the YEN and the EURO the initial favourites.

EUR/USD is now approaching the 1.40 level and is still looking bullish. The decline in the dollar comes amid rallying commodities, equities and corporate bonds, initially the increased confidence in the markets encouraged the "safe haven" dollar to be sold, however now the dollar seems to be losing its shine as a safe haven.

The dollar index which tracks the US currency against a basket of currencies has fallen to its lowest level since December 29 and has technically broken out of its upward range. Expect to see more dollar weakness with neither risk appetite or risk aversion being dollar positive.

In other news data today confirmed that GDP in the UK dropped 1.9% in the first quarter of this year- this was exactly in line with forecasts and has not moved the markets. Japan has upgraded its economic outlook and is forecasting that exports are forecasted to pick up- this follows a massive fall in exports in Q1 and a 4% fall in output- this should be Yen positive as it underlines the safe haven status of the Yen and will encourage more Yen leveraged carry trades- particularly into AUD.

Finally the Indian Rupee advanced on sentiment that Prime Minister Manmohan Singh will look to sell state assets and attract foreign investment- the INR made its biggest weekly gain against the USD since March 1996.

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.