Pound Stands Tall

Mon, 30 Apr 12 10:45 am

Across the Atlantic, the first quarter GDP numbers released on Friday disappointed market participants, fuelling speculation of QE3 in the future. However, positive consumer confidence data provided some respite to traders. A few regional manufacturing indices due today will be closely watched for gauging the strength of the recovery in the second quarter. Looking towards Europe, the debt crisis in the region seems to be taking its toll on peripheral economies, with Spain entering into a recession in the first quarter. In the UK house prices, as reported by Rightmove, have surprised on the upside earlier today, providing support to Sterling against the majors.

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Pain in Spain

Fri, 27 Apr 12 10:39 am

Worries over the debt situation in the Eurozone have escalated and affected sentiment towards the Euro, after S&P lowered Spain's long-term and short-term sovereign credit rating, citing "a challenging fiscal outlook". Yesterday’s fall in Eurozone economic confidence has added to the concerns surrounding the region. Meanwhile, the Pound was initially supported by a flat reading on consumer sentiment. Yesterday’s dismal data on retail sales and mortgage approvals seems to have left lingering doubts regarding the state of domestic economic recovery. Market participants are likely to focus on the Italian bond auction and the US GDP growth report today.

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Pound Takes Recession in Stride

Thu, 26 Apr 12 11:19 am

Yesterday’s GDP data confirmed that the UK economy has entered a technical recession and led to an immediate sell-off in Sterling. However, the currency recovered against the majors as speculation of QE3 in the US gained momentum after the Federal Reserve (Fed) indicated that it is ready to add more stimulus if required. The “risk on” sentiment has continued in today’s trading session with consumer confidence in the UK registering a sharp improvement. Markets are keeping a tab on a raft of Eurozone confidence indices, whilst regional manufacturing, jobless claims and pending home sales data in the US are due later today.

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Double Dip Recession for U.K.

Wed, 25 Apr 12 10:21 am

GDP numbers just released indicate that the UK economy has entered into a technical recession, contracting 0.2% in the first quarter of 2012. The Pound fell against the majors on the back of this release and market expectation appears to indicate this release will weigh heavily on Sterling throughout today’s trading session. With little solid data released in Europe today the attention is likely to shift to the US as the Federal Reserve (Fed), in its monetary policy decision, is likely to reiterate its intent to keep the benchmark interest rate near zero through 2014. Markets are also keeping an eye on the Fed's economic assessment and Ben Bernanke’s press conference for hints on future policy including the probability of a QE3.

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The Big Bond Sell-Off

Tue, 24 Apr 12 10:52 am

Risk sentiment turned negative yesterday following a contraction in manufacturing activity across the Eurozone. Additionally, persistent speculation that the Netherlands may lose its “AAA” credit rating, coupled with worrying political developments in France, has shifted market attention to today’s Dutch, Italian and Spanish bond auctions. Beyond Europe consumer confidence, new home sales and Richmond Fed manufacturing activity data in the US due today are keenly awaited. Markets seem to have set their eyes on the Fed’s two day policy meeting starting today. At home, data just out indicates that public sector net borrowing climbed for March, setting the stage for tomorrow’s crucial GDP numbers.

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Political Clouds Cast Gloom Over the Euro‎

Mon, 23 Apr 12 11:06 am

The G20 provided much needed relief to Eurozone members during the weekend by increasing the firepower of the IMF’s rescue fund. However data released earlier today indicating a contraction in manufacturing activity across Eurozone and China, coupled with worrying political developments in Europe, has weighed on the Euro. Across the Atlantic, the Federal Reserve’s monetary policy meeting scheduled for this week is likely to be overshadowed by Bernanke's post-meeting press conference and the initial estimate of the first quarter growth. In the UK, the focus this week is on the preliminary first quarter GDP numbers slated for Wednesday which should provide direction to Sterling against the majors.

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European Data Spurs Optimism

Fri, 20 Apr 12 11:48 am

A decent response to the Spanish bond auction yesterday and upbeat German business confidence data released earlier today has quelled some fears surrounding the Eurozone and has lent support against the majors. In the absence of major catalysts today, focus would be on the outcome of the G-20 meeting, wherein markets await clarity on contributions from various member countries. Across the Atlantic, macro indicators released yesterday disappointed investors across varied spheres including labour, manufacturing and housing, raising concerns over inherent sluggishness across sectors and fanning market speculation of QE3. At home, following remarkable gains for Sterling during the week, data just out indicated that retail sales grew for March.

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European Litmus Test Ahead

Thu, 19 Apr 12 11:08 am

The unexpected 8-1 votes in favour of QE to remain unchanged, with Adam Posen backing out from his earlier stance for further easing, resulted in Sterling breaking crucial levels against both the Euro and the US Dollar yesterday. This has taken calls for further asset purchases in the BoE’s next monetary policy meeting off the table, as inflation still continues to bother policymakers. The focus in today’s trading session returns to the Eurozone, where Spain and France are set to auction long tenure bonds amid resurgent contagion fears. The US jobless claims and Philly Fed manufacturing index are also expected to generate market interest today.

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BoE Minutes Dampens QE Hopes

Wed, 18 Apr 12 10:48 am

The minutes of the Bank of Englands' latest monetary policy meeting indicate that Adam Posen had dropped his call for further easing measures. This outcome should be highly supportive for the Pound in today’s trading session. Additionally, the domestic labour market scenario showed an improvement with a drop in the unemployment rate. Multiple factors contributed to risk positive markets yesterday, including robust Spanish short term bond auction and an unexpected improvement in German and Eurozone economic confidence indices. The IMF also quashed fears of a global slowdown following an upward revision to its global economic growth forecast.

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Spanish Spotlight Intensifies

Tue, 17 Apr 12 10:39 am

Market concerns surrounding Spain’s fiscal situation failed to abate, as the cost for insuring Spanish debt rose to an all-time high yesterday. Against this backdrop, market participants will keenly eye the outcome of Spanish short term bond auction and European sentiment indices due later today. Across the Atlantic, retail sales for March surprised market participants on the upside yesterday and led gains in high yield currencies. Today’s industrial production and housing data are expected to garner some market interest. At home, consumer price inflation rose to 3.5% for March, still below the BoE’s 2% target. This has shifted focus onto tomorrow’s minutes of the BoE’s latest policy meeting.

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The Return of the Euro Crisis

Mon, 16 Apr 12 10:35 am

The high yield currencies suffered on Friday as concerns over the global economy came to the fore following weak Chinese GDP data and rising yields of major peripheral Eurozone economies. However, there was some respite on the domestic front after S&P on Friday reaffirmed its top notch “AAA” rating for the UK. With housing data by Rightmove surprising on the upside this morning, all eyes are likely to be focused on the heavy domestic calendar this week. With little in terms of European data today, retail sales and business inventories data in the US are expected to hold market interest.

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China's Engine Decelerates

Fri, 13 Apr 12 10:50 am

The disappointing Chinese first quarter GDP data released earlier today has provided some support to safe haven currencies in this trading session. With US policymakers signaling that interest rates are likely to remain low through 2014, markets will eye US consumer price inflation data due later today. Coupled with Reuters/Michigan consumer sentiment data later this afternoon, these releases should provide food for thought for those Federal Reserve’s officials who are currently considering further quantitative easing. At home, both input and output producer price inflation have eased for March, highlighting that price pressures in the economy are decelerating somewhat.

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Risky Business

Thu, 12 Apr 12 11:13 am

Following the not so encouraging outcome of yesterday’s short tenure Italian bond auctions, where borrowing costs almost doubled, all eyes are likely to be on the longer dated bond auction in Italy due later today. This should gauge market appetite for bonds of troubled nations and will serve as a precursor for next week’s Spanish bond auctions. Across the Atlantic, market speculation of QE3 received a boost after a top Fed official opined that the further easing could be warranted, if the recovery proceeds at a slower-than-expected pace. At home, visible trade balance data just out indicates that deficit widened for February.

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Spanish Inquisition

Wed, 11 Apr 12 10:26 am

Spanish recession fears are weighing heavily on the euro, as risk sentiment took a hit yesterday following a rise in Spanish and Italian bond yields and a sharp deterioration in Eurozone investor confidence. However, high yield currencies have rebounded this morning ahead of Italian and German bond auctions scheduled for later today. The outcome of these auctions is likely to determine risk sentiment during the session. Across the Atlantic, the Federal Reserve’s Beige book survey will be keenly eyed for cues on regional trends in the economy. At home, the positive run for economic releases continues, with data released earlier today revealing an unexpected improvement in like-for-like retail sales for March.

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Risk is off the Menu

Tue, 10 Apr 12 11:23 am

Market appetite for risk remains subdued this morning following unexpectedly weak Unemployment data from the U.S. on Friday. The has once again caused investors to consider the possibility of further quantitative easing from the Fed and once again seek haven in the Dollar. At home, data this morning was upbeat, with the UK house-price index rising to a 21-month high in March, although the Royal Institution of Chartered Surveyors attributed the rise to first-time buyers taking advantage of an expiring property-tax exemption. Following a weak response to the Spanish bond auction last week, market participants remain cautious ahead of the French bond auction later today, while an Italian auction is scheduled for tomorrow.

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EUR Cracks Reopen

Thu, 05 Apr 12 10:43 am

The poor demand at Spain's debt auction yesterday sparked fears of an escalation of the European debt crisis and weighed on the Euro. The focus has now shifted to French bond auctions and German industrial production data due later today. With an extended weekend ahead and crucial US non-farm payrolls due tomorrow, traders are likely to remain cautious in today’s trading session. At home, monthly industrial production has revealed a rebound for February, following a series of strong PMI figures released earlier this week. Meanwhile, the BoE’s monetary policy meeting due later today is not expected to garner much market interest.

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QE3 Fails to Launch

Wed, 04 Apr 12 10:30 am

Yesterday, minutes of the Federal Reserve’s latest policy meeting poured cold water on market hopes of further quantitative easing in the US which has aided sentiment towards safe haven currencies. The next trigger for the markets is likely to be the ECB policy meeting due later today. The monetary policy stance is unlikely to undergo any major surprises but the ensuing press conference by the ECB President would be of key interest to market participants. At home, data just out reveals an unexpected improvement in services sector for March. This comes on the back of robust manufacturing and construction activity data released earlier this week.

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UK Manufactures Something Positive!

Tue, 03 Apr 12 10:35 am

In the UK, yesterday’s upbeat manufacturing data has revived hopes that the economy may avoid slipping into a recession and has kept calls for an imminent increase in asset purchases by the BoE at bay. Underpinning the positive sentiment, data just out indicates that construction sector activity expanded at a faster than expected pace for March. Across the Atlantic, robust ISM manufacturing data supported the risk sentiment yesterday. With little to offer in term of European data today, market participants await the minutes of the Federal Reserve’s last monetary policy meeting, which is expected to be a key determinant for risk sentiment in this trading session.

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Manufacturing Boost For Sterling

Mon, 02 Apr 12 10:31 am

The week has started on a positive note for Sterling, led by improvements in the U.K. housing market and business confidence. Aiding sentiment, manufacturing activity has also revealed an expansion for March. This coupled with Eurozone finance ministers’ approval to boost the rescue fund earlier on Friday and strong official Chinese manufacturing PMI this morning has buoyed traders and kept risk sentiment alive in today’s trading session. Across the Atlantic, the ISM manufacturing index for March will be keenly tracked today followed by the all important non-farm payrolls later this week. Markets also brace themselves for key central bank meetings in the UK and the Eurozone in the week ahead.

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