We won’t get any more information about an ECB rate cut next week

Foreign Exchange Outlook : The US dollar is gaining ground today despite yesterday’s horrible ADP Macro estimate of private sector job losses in Dec. From the US open at 8 am yesterday at 1.3595, the euro slipped to 1.3558 by the time Asia was coming in last night. This is a minor move but also a halt to the euro’s upward momentum on Tuesday.

We won't get any more information about an ECB rate cut next week. The FT reports today that the ECB is likely to leave rates on hold, but today starts the no-comment period so we have only old reports. Euros to dollars volatility is very high on the uncertainty.

In Asia overnight, falling stock markets and re-evaluation of the Obama Effect triggered a bout of risk aversion. The US dollar fell against the Japanese Yen in a continuation move from the day before, from 93.20 at 8 am yesterday to the now-customary plunge at the end of the Asian day to 91.80 and so far to 91.33. This is near the bottom of the linreg channel on the hourly chart and the move "should" stop any minute now. If not, we have a downside US dollar exchange rates breakout that risks a return to the Jan 1 low of 89.46. .

Nothing has been stranger than the rise in sterling ahead of today’s BoE decision. The pound stopped falling last Friday at 1.4375 and has risen to breakout levels on the hourly chart in fits and starts, even surpassing yesterday’s high of 1.5281 by reaching 1.5292 this morning AFTER the BOE Monetary Policy Committee cut the bank rate by 50 bp to 1.5%, a new historic low and exactly as forecast by just about everybody. Again we have no reason for such a counter-intuitive move except that there are serious dumpers of euro in the euro/pound cross and it is bleeding into the pounds to dollars.

Bye For Now

Barbara Rockefeller
Foreign Exchange Trading
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Bank of England to cut interest rates by 1 percent?

Pound Outlook : Ahead of the Bank of England action tomorrow, UK data continues to disappoint. Factory production fell 0.8% m/m in Sept for the biggest drop in 19 months. Output has fallen for 7 months for the longest losing streak since Thatcher (1980). Factory production is down 2.3% y/y. On the quarterly basis, output fell 1.3 q/q, the biggest drop since Q2 2001, which came right after 9/11.

In addition, the CIPS index of services fell from 46 in Sept to 42 in Oct, the lowest ever. The employment sub-index fell to the lowest since the survey began, according to Bloomberg. “Expectations” also fell to a record low, 50.8 from 58.2 in Sept. Some foreign exchange analysts say these terrible numbers will prompt a rate cut of more than 50 bp.

Pounds to Euros currently 1.2346
Pounds to Dollars currently 1.6180
Pounds to Australian Dollars currently 2.3288

Buy for now

Barbara Rockefeller
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Need to Buy Australian Dollars? Buying Euros get the best exchange rate -

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Euro Pounds

The Pounds fortune seams to have change and it seems in vogue again to Buy Pounds and Sell US Dollars and the next target on the technical charts would be 1.9991 which is the 200 day moving average followed by 2.0200 (normally a very good indicator).

The Euro to Pound is a little more difficult to work out as it has just whipsawed over its 80 day moving average which is roughly 0.7900. Look for it to stay capped at 0.7950 and a downside target of 0.7450.

GBP to US Dollars last 1.9875

GBP to Euro last to 1.2610

UK strikes looms as cost of living spirals

The UK economy is a threat from rising Oil and Food prices and as Inflation is expected to hit 4 percent by year end / early 2009 people are starting to take notice that their pay doesn't go quite as far as it once did. In The Times today they have reported of a new epidemic that is sweeping the UK.

The Return of the Strike.

Gordon Brown is still trying to fix public sector pay hikes at 2 percent and inflation is running at 4 percent is leading too,

"Hundreds of thousands of public sector workers are threatening to tear up agreements and demand higher pay as the cost of living surges. "

This is a major concern for the UK economy and the Bank of England as Mr King said that it was crucial that employees should not respond to the loss of their real spending power by bidding for more substantial pay increases. The rise in living costs has not yet fed through into wage demands, but policy makers fear that if this happened it could lead to a 1970s-style prices and wages spiral.

Mark Gibbons from G&G Recruitment - a Public Sector Recruitment Agency told IMS Foreign Exchange that they are defiantly seeing more IT Job hunters looking at higher paid jobs to combat Higher Prices after falling to secure a suitable pay rise in house.

This is going to have a ongoing issue for the GB Pound Currency so worth watching

Euro Economy Inflation worring trades as they Buy Euros

ECB: In State of Heighted Alert
By Kathy Lien, Chief Strategist of DailyFX.com

Although the Euro has plunged close to 400 pips as the currency market turned its focus to the comments made by US officials, traders should not lose sight of hawkish comments that have also been made by the European Central Bank. According to ECB member Liikanen, the central bank is in a state of heightened alert. Along with central bank members Liebscher and Noyer, Liikanen stressed the need to contain inflationary pressures and how the rise in prices is making their jobs increasingly difficult. Unsurprisingly, German wholesale prices increased more than expected last month while industrial production beat expectations in France and Italy. Growth in the Eurozone has been steady, which is part of the reason why the ECB has felt comfortable enough to be exceedingly hawkish. However the simultaneous hawkishness of the ECB and the Federal Reserve is exactly what could keep the Euro to US Dollar currency exchange rates range bound for at least the next 24 hours.

Bank of England to leave Rates unchanged?

The Bank of England is expected to leave rates steady on Thursday at 5.00 percent the lowest since December 2006 for the second consecutive month. Since the Monetary Policy Committee is anticipated to leave rates unchanged, they are unlikely to issue a monetary policy statement which should leave the market’s reaction to the news somewhat muted. Nevertheless, given the sharp drop we’ve seen in the British pound in recent days, even an announcement in line with expectations could lead the currency to rebound somewhat.

ECB's TRICHET is again talking price stabilityin the Euro Zone.

ECB's TRICHET is again talking price stabilityin the Euro Zone.

In a BBC interview Trichet said price stability, and CB credibility in delivering price stability, is the best way to sustain economic growth and employment. Trichet warned that the global economy was experiencing an ongoing and 'very significant' market correction. He said policy makers must avoid the mistakes of the 1970s, and CBs must stick to their long-term price stability mandate.

Euro lacks direction as Traders dont know what to do

Euro traders are looking for a fresh direction. Since the beginning of the month, the currency has been trapped within a relatively tight trading range as rising inflation meets weakening economic data. ECB President Trichet lent his weight to the debate last week when he confirmed the central bank’s focus on inflation. Although this has helped the Euro carve out a near term bottom, the tables have recently turned, leaving traders confused about where the Euro is headed next. Commodity prices have tumbled with oil prices off its highs and rice prices declining for the fourth day in a row. On the other hand, Eurozone economic data has been improving with growth in France and Germany rising more than expected in the first quarter. Strong consumer spending and rising trade balances have helped to spur growth in the first 3 months of the year, but it is important to remember that these numbers are backward looking, which is part of the reason why the Euro was unable to hold onto its gains following the report. The Eurozone trade balance is due for release tomorrow along with Swiss retail sales. The Swiss franc looks particularly bearish against the Japanese Yen which correlates with the market’s forecast for weaker consumer spending.

Recession in Spain - No Chance

Bank of Spain's Ordonez sees no chance of recession in Spain this year.I personally think he is nuts as;Over 40,000 estate agents have already shut their doors, according to the realtors federation. There are 600,000 unsold homes on the market. Unemployment is rising at a rate of 90,000 a month (seasonally adjusted). UBS says country has built up cross-border liabilities of $362bn, much of it owed to German and French banks, and is facing a foreign "funding freeze".

This is also a common theme in France and Italy so can someone please explain why the Pound is at historic lows against the Euro