Forex market report 25/03/09

  • Sterling jumps higher in the foreign exchange markets
  • UK inflation data proves stronger than expected
  • US dollar recovers slightly as rally in equity markets halts
  • Euro under pressure—possible interest rate cut by ECB next month
  • Czech Republic joins East Europe’s falling dominoes

US Dollar: The dollar is generally higher this morning as equity markets calmed down after their strong rally on Monday/Tuesday, enabling the US dollar to gain back some lost ground in its sharp retreat last week. The dollar had fallen to $1.4779 on the pound, but has recovered over a cent to trade at $1.4626 this morning. The initial fall was after inflation data in the UK showed a surprise rise, pushing the dollar to its weakest level against the pound since February 10th. Against the euro, the dollar has recovered well, taking over two cents of the single currency to trade at $1.3431 this morning. Global markets seem to be in consolidation as investors wait to see if positive reaction to the latest US rescue plan continues. Looking ahead to today we have key data due in the form of New Home Sales and Durable Goods orders, all expected to be fairly weak. Data 12.30: Durable Goods Orders expected –2.0% from –5.2%. 14.00: New Home Sales expected 300k from 309k, MoM expected –2.9% from –10.2%.

Pound: Sterling jumped in the markets yesterday as UK inflation data proved stronger than expected in February and the governor of the bank of England Mervyn King said the currency’s recent fall hadn’t been engineered and he could see no reason why it should go any lower. This morning the pound is trading at $1.4626 against the dollar, slightly down from its six week high yesterday of $1.4779. Sterling also shone through against the euro, as we saw over two cents taken off the single currency to hit a nine day high of 1.0917.The inflation data showed that UK February consumer price index rose by 0.9% on the month earlier and by 3.2% year on year, well above the expectations of a 2.0% increase on the month and a 2.5% advance on the year. The markets are likely to interpret the surprise upside on inflation as reducing the need for quantitative easing and, by extension, will see it as sterling positive. We also saw tensions rise yesterday between the Governor of the BoE and Gordon Brown, as Mervyn King warned that Britain could not afford a second economic stimulus in the Budget. Data 09.30: Retail Sales MoM expected –0.4% from 0.7%

Euro: The euro has recovered slightly this morning against the pound and levelled off against the dollar, after the bashing it took in the currency markets yesterday. We saw the euro give up over 2% on sterling, hitting a week low of 0.9160, currently trading at 0.9180. This was after a surprise jump in UK inflation and comments from the governor of the BoE which supported the pound. The euro also lost ground on the dollar, as a halt in the recent rally in equity markets gave support for the greenback, with EUR/USD losing over two and a half cents to trade at $1.3445 this morning. Also, speculation is growing that the ECB may cut interest rates by as much as 50 basis points at its meeting next week, keeping players away from buying the single currency. No data.

General:
The economic crises sweeping Central and Eastern Europe has claimed a third victim in a month after the Czech government lost a vote of no confidence on Tuesday night in a dram that risks setting off a fresh round of investor flight from the region.
Oil prices are lower on profit taking after rising to four month highs on hopes of a US economic recovery.
Nymex crude is currently trading at $53.98 per barrel.

Mid-prices
GBP/USD    1.4642
GBP/EUR    1.0890
EUR/USD   1.3415
GBP/JPY    142.79
GBP/AUD   2.1113
GBP/NZD    2.6250
GBP/ZAR    14.023
GBP/CHF    1.6532
GBP/CAD    1.8027
GBP/SGD    2.2118
GBP/THB    51.82
GBP/HKD   11.3221

These rates are for indication purposes only.

This information has been supplied by Voltrex. For further information contact: enquiries.spain@voltrexfx.com

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