Time for the US to take action?

The Dollar Index, which measures the US Dollar against a basket of other currencies, has suffered its ninth successive weekly decline for the first time since 2004. Friday’s jobless figures came in as the most recent piece of disappointing data on the US economy pulling down the currency yet further. Markets now await tomorrow’s Federal Reserve meeting – although interest rates will undoubtedly be held at the same level, whether or not there is any mention of new economic stimulus measures will be crucial to the way investors may chose to re-position themselves.

Pound Sterling – UK Markets

Sterling was trading at the mid-market rate of 1.5948 against the US Dollar and 1.2003 against the Euro at 9.30am this morning. The Pound is up against the Dollar following Friday’s negative US employment news. Today is a quiet day for UK news releases with the Pound more likely to respond to other market movements. The main focus for investors for the UK this week will be Wednesday’s quarterly inflation report which will outline the Bank of England’s outlook for both inflation and interest rates for the next three months. The CIPD (Chartered Institute of Personnel and Development) are making headlines with the release of their research which has forecast that a third of employers plan to cut jobs in the next three months. The highest levels of cuts are expected from the public sector. The CIPD’s net employment index is still positive overall however as the amount of recruitment planned still outweighs the amount of cuts. A data release by the Royal Institute of Chartered Surveyors on housing prices at 11pm this evening will come into play to affect currency markets overnight and tomorrow.

US Dollar – US Markets

Tomorrow sees the much awaited meeting of the Federal Reserve. There has been increased speculation over whether a decision will be taken to make more bond purchases in order to re-stimulate the sluggish economy. This follows yet more Dollar declines as the jobs data at the end of last week only added further evidence to current economic slow down. 131, 000 jobs were lost in July. Economists predicted that the private sector would have added 100, 000 jobs throughout the month but the actual total was revealed as a much lower 70,000. The Dollar Index as a result suffered its ninth successive weekly decline – markets will be watching the statement following tomorrow’s meeting very closely.

Euro – European Markets

The Euro has gained on the US Dollar and the Pound since Friday. The Sentix Index results have been released this morning which measure the confidence of investors towards the Eurozone economy – this has well outperformed forecasts coming at 8.5 compared to the predicted 3.8. This is thought to be due to several positive economic data releases recently to have come from the Eurozone. This has been added to today by news from Germany this morning revealing that the trade balance surplus grew throughout June. Exports increased by 28.5 percent and imports increased by 31.7 percent. Europe is still acting as Germany’s biggest client with the nation dispatching 52.6 billion to the Eurozone. Current account data for Germany was also positive with the flow of capital into Germany continuing to exceed the flow of capital out.

Other Currencies – Highlights

The Japanese Yen has continued to gain following the recent weakness in the US Dollar. This has fueled speculation that the Bank of Japan may look to discuss measures to weaken the Japanese currency at its meeting tomorrow. For a live quote or to tell us about your foreign exchange requirements, please call us on +44 (0)20 7740 0000