Foreign Exchange - Pounds Sterling and Euro Exchange Rate Outlook
The US dollar exchange rate put in a big gain across the board yesterday as stock markets around the world took big losses. From the open Sunday night at 1.2676, the euro slid to a low of 1.2535 near the US close yesterday. It might have been a bigger move except the Northeast got a huge snowstorm that left many trading rooms short-handed.
In what seems to be a new pattern developing, the euro exchange rate started rising the minute the US market "closed" around 6 pm last night, retracing exactly 100% of the downmove from Sunday night before slumping again. Another way of looking at the chart is to say the euro rate failed to match and surpass the Sunday night opening, let alone the Friday high. Still, foreign exchange traders are reluctant to push it under the round number 1.2500 to test the low from last October at 1.2329.
The US dollar exchange rate put in a big gain across the board yesterday as stock markets around the world took big losses. From the open Sunday night at 1.2676, the euro slid to a low of 1.2535 near the US close yesterday. It might have been a bigger move except the Northeast got a huge snowstorm that left many trading rooms short-handed.
In what seems to be a new pattern developing, the euro exchange rate started rising the minute the US market "closed" around 6 pm last night, retracing exactly 100% of the downmove from Sunday night before slumping again. Another way of looking at the chart is to say the euro rate failed to match and surpass the Sunday night opening, let alone the Friday high. Still, foreign exchange traders are reluctant to push it under the round number 1.2500 to test the low from last October at 1.2329.
We still see this level as manifest destiny but it’s not a speedy process as traders continue to buy euros above 1.2500.
Pound Sterling managed a touch of a level under the "George Soros 1.4000" yesterday and after bouncing off it, seems headed that way again. Prime Minister Brown speaks with Obama and the economics/financial team today, and addresses the US Congress and public. Maybe he will be more popular here than at home, where criticism is running high on his weak regulation and oversight while Chancellor, overspending, and refusing to admit mistakes. Also causing consternation is lack of clarity about exactly how and how much quantitative easing will be done. Wild numbers are being thrown around. More guidance would be nice.
The foreign exchange market is still making up its mind whether it will favor the pound for decisive BoE action or punish it for needing to take action in the first place, having let the situation get out of hand.
Note that Britain was the first to nationalize of G7 countries (excluding Iceland and Ireland) and will be the first to implement quantitative easing (excluding Japan in the 1990's).
The dollar to japanese yen is rising again for another stab at the round number 100. The correction was only about 10%, depending on how you count. While the government is going to use Foreign exchange reserves for credit purposes (see below), the Bank of Japan is not entirely pleased at the prospect.
The Australian Dollar got a boost from the Reserve Bank decision not to cut rates, leaving the key rate at 3.25%, saying that demand has not weakened as much as in other countries and the economy is not contracting as much as elsewhere. "The Australian financial systems remains strong and the monetary policy transmission process is working to deliver large reductions in interest rates to end borrowers." The RBA decision ended a string of five cuts for a total of 400 bp that started last March. The forecast had been universal that it would cut again by at least 25 bp, so the market was surprised. The Australian Dollar surged to over 64¢ from under 63¢ and seems to be hanging on to gains. Japanese investors loved it.
Pound Sterling managed a touch of a level under the "George Soros 1.4000" yesterday and after bouncing off it, seems headed that way again. Prime Minister Brown speaks with Obama and the economics/financial team today, and addresses the US Congress and public. Maybe he will be more popular here than at home, where criticism is running high on his weak regulation and oversight while Chancellor, overspending, and refusing to admit mistakes. Also causing consternation is lack of clarity about exactly how and how much quantitative easing will be done. Wild numbers are being thrown around. More guidance would be nice.
The foreign exchange market is still making up its mind whether it will favor the pound for decisive BoE action or punish it for needing to take action in the first place, having let the situation get out of hand.
Note that Britain was the first to nationalize of G7 countries (excluding Iceland and Ireland) and will be the first to implement quantitative easing (excluding Japan in the 1990's).
The dollar to japanese yen is rising again for another stab at the round number 100. The correction was only about 10%, depending on how you count. While the government is going to use Foreign exchange reserves for credit purposes (see below), the Bank of Japan is not entirely pleased at the prospect.
The Australian Dollar got a boost from the Reserve Bank decision not to cut rates, leaving the key rate at 3.25%, saying that demand has not weakened as much as in other countries and the economy is not contracting as much as elsewhere. "The Australian financial systems remains strong and the monetary policy transmission process is working to deliver large reductions in interest rates to end borrowers." The RBA decision ended a string of five cuts for a total of 400 bp that started last March. The forecast had been universal that it would cut again by at least 25 bp, so the market was surprised. The Australian Dollar surged to over 64¢ from under 63¢ and seems to be hanging on to gains. Japanese investors loved it.
We have yet to hear what the Bank of Canada is doing today. It is expected to cut 50 bp to 50 bp.
Pounds to US Dollars = 1.4000
Pounds to Euros = 1.1175
Euro to Pounds = 0.8940
Pounds to Australian Dollars = 2.1901
Bye For Now
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