The FairFX Foreign Currency Exchange Blog

Financial markets await key decisions from the Federal Reserve, the Bank of England and the European Central Bank

Mon, 02 Nov 2009 10:40:11 GMT

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.

Worst than expected UK GDP data leads to heavy sterling selling

Mon, 26 Oct 2009 17:40:14 GMT

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.

Sterling capitalises on recent gains

Tue, 20 Oct 2009 17:19:04 GMT

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.

Sterling looking to bounce back against the majors

Wed, 22 Apr 2009 11:50:34 GMT

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.

Sterling feeling the pressure again

Mon, 20 Apr 2009 13:01:51 GMT

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.

Euro under pressure against majors- Markets expect ECB to cut rates

Wed, 01 Apr 2009 10:56:58 GMT

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.

Sterling sold as UK economy continues to slump

Fri, 27 Mar 2009 11:21:59 GMT

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.

US Dollar crashes as the Federal Reserve move to aggressively buy treasuries.

Thu, 19 Mar 2009 14:39:32 GMT

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.

Deleveraging to riskier investments continues to weigh on the dollar

Tue, 17 Mar 2009 16:07:10 GMT

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.

Sterling sold aggressively across the board on further UK banking concerns

Tue, 10 Mar 2009 12:46:18 GMT

Sterling was sold against the Euro, US dollar and other major currencies as traders and market participant shorted on a delayed reaction to UK banking issues and the introduction of quantitative easing. Against the dollar sterling crashed to a six week low trading down to $1.3740. Against the Euro a similar story, the pound traded down to €1.0879.

The Bank of England will begin its purchase programme on Wednesday with a £2 billion auction for gilts. Although the bank has capped the amount it plans to spend in the coming year at £150 billion, the governor has conceded it could go far beyond this target if necessary.

Bank of England cut rates by 50 basis points as expected

Thu, 05 Mar 2009 12:44:34 GMT

The bank of England cut rates by 50 basis points, leaving the base rate at 0.5% its lowest ever. Leading up to the rate decision sterling began to feel the pressure against the Euro and US dollar after trading at a high of 1.1283 and 1.4234 respectively, this afternoon the selling has continued. The central bank has also agreed to push ahead with quantitative easing with an amount of £75bn in assets, printing money to fight the recession.

Sterling sold as UK stock market plummets

Tue, 03 Mar 2009 12:29:17 GMT

Sterling was sold aggressively yesterday against the Euro and US dollar. UK mortgage lending plunged by 60% during January. The FTSE 100 dropped 5.33% to its lowest level since March 2003 as HSBC shares crashed 19%. The pressure was on sterling from every angle, risk-aversion ruled the day rallying the greenback as the “Safe haven” currency.

Market participant are beginning to speculate on the up and coming interest rate decision, talk of a shift towards quantitative easing is keeping the pressure on the pound.

Sterling sold as UK house prices decline.

Mon, 02 Mar 2009 12:50:16 GMT

The pound was sold against the US dollar and the Euro as UK house prices dropped along with a decline in stocks. UK banks have been adding to the pressure on house prices as they grant fewer mortgages.

This week the Bank of England is once again expected to reduce its bench mark interest rate. Economists expects rates to be cut to 0.5%. The central bank may also signal intent to boost the money supply by 100 billion pounds via quantitative easing.

Bank of England consider alternative methods as rate cuts fail to revive UK economy

Wed, 18 Feb 2009 15:19:39 GMT

The Bank of England’s MPC collectively agreed that quantitative easing should be used in conjunction with rate cuts. The governor has acknowledged that with interest rates approaching zero percent, the central bank will be forced into creating money to kick-start the economy in order to prevent inflation from falling too far below the governments 2% target. The government has given the Bank of England the mandate to begin buying commercial paper from struggling companies under a programme financed by the sale of government securities.

After being sold during the early part of last week, sterling has bounced back as the pressure increases on the Euro from all sides. The pound is currently trading at 1.13 against the Euro.

Against the US dollar, sterling is beginning to form a range as it fails to break below the 1.41 level. Towards the end of January sterling traded at 1.35 against the US dollar, the pound then rallied up to 1.4986. Sterling is currently trading at 1.42 against the US dollar.

Sterling feels the pressure again

Wed, 11 Feb 2009 12:05:27 GMT

Yesterday sterling tested new highs for this year against the Euro above the 1.1550 level. The pound was then sold aggressively, the momentum has continued to have carried over to today currently testing the 1.11 region.

A similar story against the US dollar, on Monday the pound traded within touching distance of $1.5 level. Yesterday traders begun to sell sterling aggressively, today cable is trading back down in the 1.4350 region.

The US Treasury revealed a $1.5 trillion dollar bank bailout plan yesterday, as the US senate passed a new economic stimulus package, expected to cost $838 billion.