Smart Currency Daily Rates & Comments – 11 November 2010

Smart Currency Daily Rates & Comments – 11 November 2010

Sterling hit the highest level against the euro since late September as speculation over near term Quantitative Easing eased following the Bank of England’s inflation report. Sterling hit a high of €1.1723/£1 as the report showed that inflation would remain above target next year, as higher VAT and projected higher import costs take effect. Mervyn King came out with quote of the year in reference to the Bank of England’s approach ahead of England’s cricket tour to Australia: “Like the English batsmen preparing to defend the Ashes, watching carefully, perfectly balanced in the crease, ready to play forward or back according to the length of the incoming delivery… the MPC will watch the incoming data carefully, ready to adjust policy in either direction in order to keep inflation on track to meet the 2% target in the medium term.” The risk of more Quantitative Easing still remains, with many analysts now estimating that there is no chance of more money being pumped into the economy until spring next year. The fact that the door has not been fully closed on the programme means that sterling gains will be limited. Out today, there is consumer confidence data, so call in now for a live exchange rate.

In the Euro zone, worries over the Irish political situation continued to see investors look for shelter in other currencies. Brian Lenihan took a grilling from Jeremy Paxman on BBC Newsnight last night, which probably didn’t help. The Irish government has to pay very high returns on bonds – similar levels to Greece – as investors avoid investing as they fear they will not see any of their money back. French industrial production came in slightly lower than expected and this combined with debt fears saw the euro hit a low of $1.3671/€1. Call in now to speak to one of the traders.

In the USA, strong US data and better than expected unemployment claims figures helped bring the US dollar to a one month high against the euro and Japanese yen. In a month that has seen the US dollar sold heavily ahead of the Federal Reserve decision to add $600bn into the economy, the news that the trade deficit had dropped by $1.0bn and unemployment claims dropped by 16,000 on last month led many analysts to speculate that the US economy had turned a corner. Speak to one off the team now to avoid missing out.

Elsewhere, the G20 summit kicks off tomorrow in South Korea and the big issue is the global imbalances of currency wars. A weak US dollar is causing backlash around the world as ‘hot money’ (i.e. money solely used for high risk investment) flows into other economies and causes potential asset bubbles. Watch this space – check out this video on the BBC which outlines the problems perfectly http://bbc.in/dCqthh.

EURO/GBP – 1.172
US$/GBP – 1.615
CHF/GBP – 1.566
CAN$/GBP – 1.614
AUS$/GBP – 1.608
ZAR/GBP – 11.106
JPY/GBP – 132.88
HKD/GBP – 12.519
NZD/GBP – 2.055
US$/EURO – 1.376

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