Sterling
What was expected to be a quiet day for sterling quickly changed as sterling lost over a cent against the euro and the US dollar mid-morning. The initial catalyst for this was Consumer Price Inflation having increased at a rate of 2.7% in May, higher than expectations and up from 2.4% the previous months. Worries about what today’s Bank of England minutes will contain following this higher than expected inflation also unnerved the markets. And then we had the President of the European Central Bank announce that they were considering non-conventional measures to stimulate the Eurozone which lent support to the euro. Just highlights how nervous the markets still are and we are likely to see further volatility throughout today as the official BoE meeting minutes are released this morning and Bank of England Governor Mervyn King speaks this afternoon. Due to rising petrol, clothing and air travel costs keeping inflation rates stubbornly above the bank's the 2.0% target, further quantitative easing and interest rate changes remain hot talking points. Speak to your trader now for an update on sterling activity.
The euro has now overtaken the Swedish kroner as the year's strongest performing major currency. Though this is testament to investor confidence in Europe's government officials, inflating currency value threatens smaller member nation's ability to stimulate exports amidst the longest recession in memory. Indeed, recent statistics showed goods sold to outside the euro zone fell 0.8% from the previous quarter. Yesterday morning's German ZEW sentiment surpassed expectations for the month. The reading emerges despite many markets weakening, and though a consensus of 38.5 is still well below March's reading of 48.5, the single currency performed well on Tuesday – continuing its ascent against the US dollar and jumping by almost a cent against sterling. The survey certainly suggests Germany’s economy is due to gather pace in the second half of the year, though with the open possibility of negative deposit rates, an accommodative monetary policy and stagnant growth overall, a sustained rise in euro prices may not be healthy for a struggling Eurozone economy. Please telephone in for feedback on the euro.
US dollar
Speculation swept through dollar markets yesterday with whispers of Federal Open Market Committee Chairman Ben Bernanke's potential retirement, chatter about today’s Federal Reserve meeting and talk over when quantitative easing could be reined in. The result meant volatile conditions for the US dollar – moving quickly as it strengthened against sterling but lost ground again against the euro. Disturbance in price levels is likely to continue today as we wait on Mr Bernanke to clarify his strategy for the US monetary stimulus programme going forward in this evening's press conference. Call your trader today to find out which way rates are trending ahead of this evening's announcements.
Yesterday the Australian dollar continued to struggle; declining against all of its 16 major trading partners off the back of monthly central bank meeting minutes being released. The minutes show the Reserve Bank indicating that the currency will weaken further - paving the way for further easing of borrowing costs. The currency fell most notably against the US dollar, as did the New Zealand dollar and the Japanese yen as markets anticipate the result of the US central bank meeting. The Russian rouble also had a poor day on Tuesday as crude oil, Russia's biggest export, dropped in price. Today we have the new Governor of the Bank of Canada making his first speech. As it is his first address, expect the markets to be particularly sensitive as he sets the tone for his monetary policy. We also have quarterly growth data coming out of New Zealand and Japanese trade balance figures this morning. Get in touch for rates and feedback on a busy Wednesday for global economic news.
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