- Sterling supported after rebound in consumer confidence
- Japanese Yen weaker as G7 discussions unlikely
- Aussie interest rates on hold
As the Victoria and Albert makes an exhibition of Kylie’s togs and
global warming has apparently chilled the UK (no I don’t understand it
either), we hit the middle of the week with more of a whimper than a
roar. Sterling gained some ground after consumer confidence rebounded
from December’s disappointing reading and ahead of the interest rate
setting meeting at the Bank of England. Whether it will maintain that
strength after this morning’s industrial production and manufacturing
output numbers, which are expected to be pretty dull, is in the lap of
the gods. What may also weigh on the Pound is an expected upturn in
German industrial and manufacturing output and an expected upturn in US
productivity. All of these numbers and more are due for release today
but they are as nothing compared with the effect that that UK interest
rate decision will have tomorrow or the European Central Bank’s press
conference due at 13.30 GMT tomorrow.
The ECB, as mentioned in this report a number of times, are not
expected to move their interest rates but traders will scrutinise their
words in the press conference for clues as to when the next interest
rate hike will be. The Bank of England are also expected to sit on
their hands for another month but there is a 25 percent chance of a 25
basis point base rate hike which is priced in to the bond markets; so a
‘no change’ decision should weaken the Pound slightly and we will then
have to wait a fortnight before we can see how the voting split and the
views of the Monetary Policy Committee members in the release of the
minutes.
Elsewhere, the Japanese Yen slipped after Japanese officials
suggested that Yen weakness won’t be a major talking point at this
weekend’s G7 meeting and the Chinese Yuan continues in the well
publicised plan by the Chinese authorities to allow gradual
strengthening of their currency,
which is a move which may be partially aimed at appeasing the US
treasury Secretary. And finally, Valentine’s Day is only a week away
guys and you know how much hassle you’ll be in if you forget, so don’t
leave it to the last minute like I generally do. Sorry Deb.
The US Dollar ran out of breath yesterday after the Pound rebounded and
the Euro found some buying interest as well. The words of the Head of
the Federal Reserve were ignored as he spoke about income variation
across the US but the comments from the US Treasury Secretary, Henry
Paulson were heeded and Dollar-Yen trading was the highlight of the
day. Mr Paulson voiced his concerns over criticism of the Japanese
authorities for allowing the Yen to get to such an extreme level of
weakness, saying that even though we may not like the position of the
Yen, it is traded in a free and open market and suggested that it was
entirely correct that this means it will be stronger and weaker from
time to time. The Yen strength that followed his comments and the
expectation that the Yen will jot be on the G7 agenda, added to the
USD’s weakness which characterised Tuesday’s trade. The USD may well
gain a little strength in late UK trade as long as the productivity and
labour costs are in line with market forecasts. US Dollar buyers may
get their best chance before noon (GMT).
Just a short report on the Aussie Dollar today because very little has
happened but the Reserve Bank of Australia did, as expected, leave its
base interest rate alone at 6.25 percent overnight. Against the Pound
the AUD is as flat as Kylies stomach and as boring as a picture of
tartan slippers but against the US Dollar, the Aussie Dollar managed to
remain above a very important support level at 77 cents and that does
bode well for Australian Dollar strength. This is clearly not what you
want to be hearing if you have Aussie Dollars to buy for migration
purposes but it is better to hear about it before GBPAUD slides than
afterwards.
Actual conversation between BT home IT advisor and a user
Customer: "My family in Australia use BT Softphone, I can see them but they can't see me."
Advisor: "What brand is your webcam?"
Customer: "What's a webcam?"
FX Research and Analysis undertaken by:
David Johnson - Halo Financial
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