FAIRFX

The FairFX Foreign Currency Exchange Blog

Disclaimer: THIS MATERIAL IS NOT INVESTMENT RESEARCH AS DEFINED BY THE FINANCIAL CONDUCT AUTHORITY

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Looking ahead this week, the minutes of the Bank of England November meeting and UK inflation data will give some insight on short term sterling trend. The MPC minutes are due to be released on Wednesday and will give financial markets some indication of sentiment among committee members. If the consensus was that more Quantitative easing was favoured, this may increase the pressure on sterling.

Recent surveys have shown that business confidence fell for a second straight month in October, credit conditions still remain tight. House prices dipped in the first half of November. The UK economy is likely to have a “wavering” and unsteady path to recovery.

Traders will also be watching EUR/USD very closely this week, after making a good attempt to break above this year’s high last week the pair failed at 1.5050. The Euro was quickly pushed back towards 1.48 before finishing the week at 1.49. This move is fairly significant, given the current sentiment of the Euro positioned in severely overbought territory. From a technical perspective the Euro is a better sell at these levels. For now the 1.5063 level is key resistance, it is possible the pair is setting up a reversal pattern.

Monday 16 November 2009, 12:19pm

The Global equity sell off has prompt safe haven buying in currency markets. The US dollar rally has kept the pressure on the Euro and Sterling. Investors will be taking a cautious stance ahead of the major central bank meetings. This morning the pound is failing to find any real direction, there is still some ambiguity as to whether the Bank of England will expand the quantitative easing programme and if so, how far?

This week could potentially set the tone to where the financial markets are expected to finish the year with traders awaiting key decisions from the Federal Reserve, the Bank of England and the European Central Bank. Although markets are not expecting a change in base rate by the Federal Reserve, comments will be followed carefully as traders begin to speculate on the direction of monetary policy. If the markets choose to take a cautious stance we would expect the dollar to appreciate as the “safe haven” currency of choice.

Although it is widely expected the Bank of England will extend the Asset Purchase Facility from £175 billion, there is some debate as to how far. A significant rise could see the pressure come back onto Sterling across all board.

Monday 02 November 2009, 10:40am

Shocking GDP figures released on Friday lead to aggressive sterling selling across the board. The UK economic data showed a surprise contraction in UK economic growth. These figures have damaged sentiment cutting into optimism about economic recovery prospects. The data release wiped out all the gains made by sterling during the week. UK interest rates are expected to remain lower for longer and further quantitative easing may be required.

This afternoon we have seen some aggressive selling in the Euro against the US dollar, this has led to divergence in Sterling. The pound currently trading back at 1.0980 against the Euro and 1.6320 against the US dollar.

Monday 26 October 2009, 05:40pm

A positive week for sterling last week, the pound has managed to hold onto recent gains, trading above 1.10 today against the Euro and currently at 1.64 against the US dollar. It going to be a busy week for economic data, dollar weakness is expected to remain as market participants continue to move into riskier assets and higher yielding currencies. Recent sterling strength has made it much more attractive for clients interested in purchasing Euros and US dollars. Many clients have took advantage of the rates by locking in forward contracts for short term requirements.

Tomorrow the bank of England are due to release their minutes from their previous policy meeting. Trader will begin to speculate on discussions surrounding quantitative easing. Any indication that policy makers are less inclined to extend quantitative easing any further could see sterling extend its recent gains. Equally, any talk of an expansion could see aggressive sterling selling.

Tuesday 20 October 2009, 05:19pm

Tags: bank of england, economic data, euro, euros, us dollars

Investors focus will turn to the budget today announced by UK chancellor Alistair Darling. UK debt will be the centre of attention. The IMF was forced to withdraw a claim that Britain faces a bill of £200bn for the bank bailout. Treasury reports confirmed the figures were inaccurate and issued in error. Sterling is expected to remain fairly choppy today against both the Euro and US dollar. Yesterday was a positive day across the board for the pound.

Wednesday 22 April 2009, 11:50am

Sterling is feeling the pressure as CBI sees UK economy shrink by 3.9% in 2009. After a great week against the Euro where sterling closed close to the highs, the pound is under fire this morning after falling from a high of 1.1365, currently trading at 1.1227. The CBI data is pointing towards growth in Spring of 2010.

Since the middle of last week the US dollar began to fight back against the pound, as investors begin to hide back in the US dollar prior to the release of corporate earning figures due this week.

Monday 20 April 2009, 01:01pm

Sterling took full advantage as the Euro came under fire yesterday. The pound cleanly broke back above the 1.08 level. The Euro is suffering on the back of speculation of a potential interest rate cut due tomorrow from the ECB.

The G20 meeting starts today in London, continuing into Thursday so currency markets are expected to remain volatile with remarks by world leaders expected to have an impact on the majors.

Wednesday 01 April 2009, 10:56am

The pressure has come back onto sterling as a government report showed the UK economy sank deeper into recession that economists forecast.

Sterling had a good start to the year against the Euro. After trading at a low of 1.02 towards the end of last year, the pound surged to a high of 1.1575 against the single currency. Currently trading at 1.0650, sterling has now given back most of its gains.

A similar story against the US dollar, it been a tough week for the pound. Cable traded at a high of 1.4779 on Tuesday, currently trading at 1.4300 the pound is set to finish the week close to the lows.

Friday 27 March 2009, 11:21am

The US dollar sank across the board yesterday as the federal reserve announced extreme measures to revive the US economy which included planning to buy billions of dollars worth of government debt. The FOMC decision sent the dollar crashing against the majors.

The Fed’s plan to buy $300 billion of long term government debt over the next 6 months. The plan is to improve private credit markets. With the US easing monetary conditions this aggressively, it is likely there will be a greater supply of dollars, there could be more inflation risk and more dollar weakness.

Thursday 19 March 2009, 02:39pm

The US dollar has advanced against various currencies over the last several months, a significant portion of this move has been from deleveraging from emerging market assets and other higher risk investments into funding currencies. Analysts now confirm these flows have been fading. This has seen the dollar lose ground against its major rivals.

The FOMC started its two day meeting today which will finish tomorrow, policy makers are expected to release their official forecasts for the economy. Interest rates are expected to stay the same.

Tuesday 17 March 2009, 04:07pm

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