Currency exchange update 12/11/09
- Australian dollar trading at 15-month highs
- U.K pound slumps after Mervyn King’s comments
- Gold hits record high of $1,121.72/troy ounce
- Euro rallies on increase in risk appetite
- US dollar sold off as equities trade higher
US Dollar: Are monetary policy officials and market participants worried about the same thing when it comes to the US dollar? Certainly not. Central bankers and government officials are concerned about stabilizing growth, keeping inflation inline and providing financial stability. Off the radar, there is also the desire to keep FX volatility to a minimum; and there may even be an unspoken approval of the currency’s weakness as it bolsters trade and thereby opens a very-welcome stream of income. However, in the long-term these decision makers know the importance of a strong dollar when it comes to the United States’ position in the global economy. A permanent fall in the greenback’s influence will almost certainly mean the same for the nation in other regards. However, these are long-term concerns. For the immediate future, trades are concerned primarily with risk appetite and the dollar’s relationship to this underlying fundamental driver. DATA: Initial Jobless Claims, Mortgage Applications
Pound: Yesterday proved to be a rather bad day for the pound as it slipped 80 points on its trade-weighted index, its biggest decline since October 23rd. It is clear from Mervyn King’s comments that the central bank wants a weaker pound and this spooked the market especially when he stated that he was open to more quantitative easing if necessary. He did also mention that he thought it would be unnecessary but this was overlooked by the market. The sterling rate index as a result is now back below the key 80.00 level and looking a little on the soft side. There are some positive signs. The labour market certainly looks to have pulled out of its apparent death spiral from earlier this year. The rate of earnings growth is still falling at a pretty fast clip, which is bad news for consumer spending particularly since the Bank expects inflation to spike at almost 3% in early 2010. Put simply it means that in coming months Britons will again be suffering falls in their disposable incomes. DATA: No data
Euro: The euro took full advantage of an under fire pound yesterday as the single currency took 1.2% off sterling to push EUR/GBP back to 0.9065. The common currency also performed well against the greenback as it eased back at the start of yesterday’s trading after failing to test a fresh 2009 high above October’s $1.5064, peaking at $1.5049 overnight in London. Euro-dollar managed to regain the $1.5000 level overnight after betterthan-expected Australian data sparked a rise in most major currencies, except the U.S. dollar. But euro-dollar’s rise ran out of steam at $1.5017 as euro-yen then backed off, allowing the dollar to regain some ground. In late morning dealings, dollar-yen was at Y89.82, barely changed from Y89.90 in late London trading while euro-yen was at Y134.80 after slipping from a Y135.03 morning high. Euro-dollar was trading at $1.5008 compared with $1.5042. DATA: ECB Monthly report and Euro-Zone Industrial Production
General:
The Australian dollar shot up almost three quarters of a cent to a 15-month high immediately after the release of better-than-expected employment figures. During the local session, the unit traded between $US0.9298 and $US0.9371, its highest point since August 2008.
Mid-prices
GBP/USD 1.6520
GBP/EUR 1.1034
EUR/USD 1.4969
GBP/JPY 148.31
GBP/AUD 1.7704
GBP/NZD 2.2330
GBP/ZAR 12.2257
GBP/CHF 1.6670
GBP/CAD 1.7269
GBP/SGD 2.2940
GBP/THB 54.85
GBP/HKD 12.8064
Voltrex
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