Forex market report 26/03/09

  • Volatile day in currency markets blamed on Geithner comments
  • Sterling sees losses posted against both dollar and euro
  • Dollar sees huge swings on confusion of global reserve currency status
  • Euro pulls back some losses despite weak economic data from Germany
  • IMF rescues Romania with €20bn and Serbia handed €4bn.

US Dollar: The US dollar saw a traumatic day in the markets yesterday as a huge drop in the strength of the greenback was seen amid confusion over US Treasury Secretary Tim Geithner’s comments. Geithner initially appeared willing to entertain a Chinese proposal that an international currency supplant the US dollar as the key global reserve currency, but later added “the dollar remains the world’s dominant reserve currency and I think that’s likely to continue for a long period of time.” The probability of the US actively talking the dollar down re¬mains remote, but it has left some doubt in investors minds.  The reaction of this was to see the dollar drop over two cents against sterling in the space of minutes, from $1.4548 to trade at $1.4738, then re-tracing back to $1.4591 more or less straight away. A similar story was seen against the euro, with an initial  sell off of the dollar of two cents, but again, almost immediately we saw the retracement back by a cent to trade around $1.3510. Data 12.30: GDP4Q expec.–6.6% from –6.2%, Personal Con. –4.4% from –4.3%. Speakers 14.00: Geithner

Pound: It was not sterling’s day yesterday, and that doesn’t even take into account the huge swings we saw on cable on the back of comments by the US Treasury Secretary. After decent gains for the pound earlier in the week, we were hit with dire economic data in the form of the CBI data, showing sales volumes at UK retailers declined rapidly in March and much more than expected, as economic recession and depressed consumer con¬fidence continued. The survey’s retail balance fell to –44 from –25 in February. Market participants had been expecting the balance to slide to –35. This saw the pound sold off against the euro and dollar. Sterling gave up a whopping two cents on the euro, from 1.0896 to hit an intraday low of 1.0669, recovering slightly this morning to trade at 1.0753. Cable didn’t fair much better as we saw over two cents given up on the dollar, to hit an intra¬day low of $1.4515. In the middle of this, we saw the huge wobble on the dollar after US Treasury Secretary’s comments saw the dollar sold off aggressively, with a swing of two cents both ways within minutes of each other. Data 09.30: Retail Sales MoM expected –0.4% from 0.7%, YoY expected 2.5% from 3.6%.

Euro: It was a fairly good day for the euro yesterday with gains made on the dollar and sterling. And this didn’t even take into account the wobble which the dollar had on the single currency half way through yesterday’s trading. There was a gain of one and a half cents on the greenback, to hit over $1.36, and in the middle of that, was a surge against the dollar for EUR/USD to hit an intraday high of $1.3648, which was immediately given back after the US Treasury Secretary corrected his comments on the value of the dollar.  It was an impressive day for the euro against sterling, as we saw over 2% gained on the pound, to hit an intraday high of 0.9373. This was despite weak economic data from Germany in the form of the Munich based Ifo institute report,. This showed the index dropped from 82.6 in Feb to 82.1 in March, the lowest since the pan-German survey began in Jan 1991. Be aware however that sentiment towards the single currency remains weak as investors believe the ECB will likely cut interest rates by 50-75 basis points at its meeting on April 2nd. Data 09.00: Italian Trade Balance & E/Zone M3 YoY.

Romania has joined the long list of countries in Eastern Europe to tap emergency aid from the International Monetary Fund (IMF), securing a €20bn package to help cover an avalanche of foreign debts due this year. This is hot on the tracks after we saw the Czech government virtually collapse the previous day
Oil prices rose overnight to $53.31/barrel as optimism remained about the economic recovery in the US.


GBP/USD                        1.4605
GBP/EUR                        1.0765
EUR/USD                        1.3566
GBP/JPY                         142.81
GBP/AUD                        2.0810
GBP/NZD                         2.5239
GBP/ZAR                         14.752
GBP/CHF                         1.6359
GBP/CAD                        1.7920
GBP/SGD                        2.1992
GBP/THB                         51.54
GBP/HKD                        11.319
These rates are for indication purposes only.

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One Response to “Forex market report 26/03/09”

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