major hedge fund selling US dollars on the idea that the Fed will announce quantitative easing at the Wednesday FOMC

Foreign Exchange - Pounds Sterling and Euro Exchange Rate Outlook

What’s Happening This Morning: Initially the lack of consensus at G20 was dollar exchange rate -supportive, but the euro rate broke through the 1.3000 level just after 5 am ET today, a few hours into the European open and stopping just below the 1.3050 level (so far). This means our charts, which show a flat move across the board from 5 am on Friday, will look very different tomorrow unless the move over the magic round number turns out to be a one-time spike. This is not likely since the move is driven, according to Market News, by major hedge fund selling US dollars on the idea that the Fed will announce quantitative easing at the Wednesday FOMC meeting, following the UK. In addition, the euro to japanese yen is up to 128.41 or nearly 200 points from the Friday close at 126.60 in the US. The yen is under some pressure because of speculation the BoJ will also announce quantitative easing measures at this week’s policy meeting, although the Nihon Keizai Shimbun reports the BoJ will be working out the details over the next month.

Pound Sterling got a lift to over 1.4200 on inflows to financial sector equities after Barclays confirmed it is in talks to sell (for £3-5 billion) its iShares fund management unit, thus avoiding the clutches of the government. The market also liked fresh data from Rightmove saying house prices are up for a second month (if still down 9% y/y).

Against the Swiss franc, the US dollar is failing to make progress and could easily break support around 1.1740. To the extent the Swiss franc tracks the euro, the SNB will be very unhappy about the new upmove in the euro exchange rate. We couldn't find any fresh commentary this morning on whether the SNB will intervene again.

Uncertainty on this point makes the dollar/Swiss virtually untradeable.

Pounds to US Dollars = 1.4070
Pounds to Euros = 1.0825
Euro to Pounds = 0.9235
Pounds to Australian Dollars = 2.1380

Bye For Now

Barbara Rockefeller
Foreign Exchange Trading
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