Forex market report 20/03/09

  • Sterling remains stronger against a weaker USD
  • Britain is already a long way through the recession—BoE economist
  • Germany’s economic slump gains momentum
  • Total US job claims soared to a fresh record high near 5.5 million
  • UK Public sector borrowing, higher at 9.0B

US Dollar: The recent weakness seen by the USD triggered by the Federal reserve’s decision to adopt aggressive quantitative easing on weds evening continued yesterday morning pushing sterling up from 1.4269 around 8am to a high of 1.4567 by mid afternoon and from 1.3476 to 1.3736 against the Euro in the same timeframe. Yesterday saw the Euro stage the largest one-day rally ever against the USD. There is now expectation for the USD to suffer from an increase in global risk appetite from such large easing in US monetary policy and a likely rise in inflationary concerns longer term. The method of quantitative easing comes after similar exercise in Japan and more recently in the UK. Some traders “are left wondering whether the FED is taking this action because they fear the ongoing slowdown could be even worse than currently expected—and they are getting their retaliation in first” said IG Index strategist David Jones. US stocks futures are lower this morning, after markets fell Thursday as such banks as Citibank gave back of the week’s gains. Unemployment claims came in at 646k yesterday, lower than the expected 652k but remain high near 5.5 million. Data: FED Chairman Ben Bernanke speaks at 16:00pm

Pound: Sterling remains in good shape this morning against the USD at 1.4542 as USD weakness continues to pin up the current  exchange rate. The pound has also recovered from overnight weakness against the Euro trading back above 1.06. Spencer Dale, chief economist of the Bank of England commented that nothing in most recent data had caused him to revised last month’s forecast suggesting that “a substantial amount of the total contraction we’re going to see has come through” . This outlook was justified by highlighting the effects of a large number of interest rate cuts, aggressive quantitative easing, lower commodity prices,  the pound’s fall and banking bail-out, a stimulus, that was “significantly greater than that seen at comparable points in previous recessions”. Chancellor Darling refused to say that the prime minister should apologise for Britain’s economic collapse and instead highlighted “What will help all of us is if we put forward measures to strengthen and improve our regulatory regime that will help us get through this downturn and recover as quickly as possible” Lets hope sterling recovers in the same way. No data due

Euro: The European currency is down slightly against the USD, yen and sterling this morning but some market participants predict the EUR continuing to rally against the USD. The Euro should remain well supported in the current market but there will be a heavy influenced by expectations over Euro-zone interest rates leading up to early April when the ECB meet again on the 2nd of April. Some market participants are questioning why the ECB are keeping interest rates relatively high after drastic cuts made by the UK and US. The fact remains economically the economy is showing continues signs of being under pressure. Germany has been hard hit by the global downturn due to its reliance on exports, the German Finance Ministry said today, adding that there are no signs for a turnaround yet. This is not being helped at all by such a strong Euro. Data: Industrial production forecast –3.8% prev –2.6%. Italian unemployment rate, forecast 7% prev 6.7%.

Canadian dollar – The loony has now weakened off against sterling in a move that has mirrored what has happened with the USD
• Gold – Spot gold slipped after rallying more than $30 overnight, falling $7.30 to $951.70 a troy ounce
• Oil – Oil prices are lower this morning but stayed around $51 a barrel


GBP/USD                        1.4537
GBP/EUR                        1.0630
EUR/USD                        1.3670
GBP/JPY                         137.47
GBP/AUD                        2.1014
GBP/NZD                         2.5837
GBP/ZAR                         13.9797
GBP/CHF                         1.6262
GBP/CAD                        1.7922
GBP/SGD                        2.1926
GBP/THB                         51.293
GBP/HKD                        11.2652
These rates are for indication purposes only.

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One Response to “Forex market report 20/03/09”

  1. Andrew says:

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