- US Dollar on defensive ahead of US retail and inflation numbers
- Aussie Dollar slips on flat interest rate forecasts
After a weekend which
embarrassed English rugby supporters, we come back to the news that
imprisoned junkies who were forced to quit are to be paid compensation.
Perhaps those prisoners who went straight should be compensated for the
disruption to their life of crime and the murderers should get a payout
for the lack of victims inside. It appears these days that your
‘rights’ increase in direct proportion to the lack of responsibility
and respect you demonstrate towards yourself and everyone else around
you; insanity doesn’t even begin to describe it. This promises to be a
slightly more sane week in the markets with slew of both consumer and
industrial inflation data to mull over. After the UK interest rate rise
last week, traders will scrutinise the UK inflation and producer price
indices due today and tomorrow as well as the BoE Inflation report on
Wednesday. On the other side of the pond, the stream of speeches from
Fed
members will be analysed in equally intricate detail after mixed
messages from the US central bank. And the data comes thick and fast
all week; right up until Friday afternoon’s US housing numbers. Apart
from the inflation numbers, the highlights will be the US Treasury
inward investment flows and an expected downturn in US industrial
production (due for release on Thursday). Have a great week and don’t
forget to tune in to see Sam Stanley, Dealing Director, on financial
television channel CNBC tomorrow at 09.50. In the meantime, enjoy the
autumn sunshine and just remember it is only a few weeks before a host
of vaguely famous people will be asked to switch on Christmas lights in
towns near you. I bet you can’t wait.
The Australian Dollar has
weakened over the weekend as traders have scaled back their
expectations of further interest rate rises from the Reserve Bank of
Australia. It’s not that the markets don’t expect another hike from the
RBA, it’s more a case that they have lengthened the time frame on their
forecasts. Many had been forecasting another hike in the first quarter
of 2007 but most are now shuffling that estimate to the 2nd and even
3rd quarter. This has allowed the GBPAUD exchange rate to push up to
flirt with A$2.50. However, A$2.4990 represents a 50 percent
retracement from the October high to the November low and that should
be enough of a hurdle to stall or even stop the upward momentum. If
Sterling were making ground against other currencies, then this upward
drive would be unstoppable but Sterling is only demonstrably strong
against the US Dollar and is slipping elsewhere. Orders above A$2.50
will remain
a speculative guess but anything between A$2.4850 and A$2.4950 stands a
decent chance of being hit
Sterling failed again at the
top of its upward channel against the Euro when it hit €1.4990 on the
last day of October. It is now in a downward movement which should see
it target at least €1.4720. This is great news for those who are
selling Euros to repatriate funds from the sale of overseas property
and for those in Europe planning a move to the UK. However, for those
who are in the UK and buying property in the Eurozone or the likes of
Hungary, Bulgaria etc, this is a costly move. The problem is that, if
the analysts and economists have got their sums right, the European
Central Bank is planning another interest rate hike before the end of
the year and that will strengthen the Euro, both in the lead up to any
rate hike and in possibly in the aftermath of the decision. At the
moment, the ECB members themselves and their Chairman are hinting
heavily that this is their plan and so we can expect GBPEUR to slide
further. €1.4720 represents a channel bottom which supported this pair
in August, September and October and should at least stall the downward
momentum initially. However, don’t rely on it and protect yourself if
you need to buy Euros in the medium term.
In politics stupidity is not a handicap.
Napoleon Bonaparte
FX Research and Analysis undertaken by:
David Johnson - Halo Financial
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