Forex market report 24/03/09
- US Treasury Secretary details proposals to deal with toxic assets
- Stock markets soar as risk sentiment retracts
- Yen and dollar sold off across the board
- Sterling sees gain on euro and US dollar
- New Zealand and Australian dollars continue to make gains
US Dollar: US stocks soared on Monday, dragging down the dollar after Treasury Secretary Tim Geithner detailed his pro¬posals for public-private partnerships to deal with toxic assets in the financial system and prominent investors vowed to take part in the programme. This pushed investors to sell the lower yielding and ’safe haven’ curren¬cies such as the US dollar and yen, and buy more higher yielding currencies, namely the euro, Aussie and Kiwi dollars, and to an extent, the pound. The dollar gave up nearly three cents against the pound to trade over $1.47 and nearly two cents against the euro to hit $1.3677. The dollar did gain against the yen, as the Japanese currency became the whipping boy currency for the day. The stock markets rose, with a gain for the S+P of over 7% and the Dow gaining over 6% and oil pushing higher, all combining to put pressure on the greenback. Data 14.00: House Price Index MoM expected –0.8% from 0.1%. Speakers 14.00: Bernanke & Geithner.
Pound: Sterling was sitting pretty yesterday as we saw another dramatic day in the currency markets. There was always going to be big moves with the anticipation of US Treasury secretary’s announcement on how the US was going to deal with the so called ‘toxic assets’, and the markets didn’t disappoint. A surge in investor confidence saw stock markets rally, oil up, gold up and a sell off for the buck, with the pound being one of the main benefactors. Cable gained nearly three cents to multi month highs of $1.4736. We also saw sterling rise against the euro, with an impressive gain of nearly two cents to trade close to 1.08. This was also helped by the fact the Germany is now calling for its economy to contract by 4.5% instead of 2.25% in GDP, and the president of the ECB say¬ing the interest rate could go lower. Data 09.30: CPI YoY expected 2.6% from 3.0% & BBA Loans for House Purchase.
Euro: The euro surged against the yen and dollar yesterday, as it benefitted from the US move for helping with toxic assets. A gain of nearly two cents was posted as the single unit hit close to $1.37. The euro didn’t fair to well against the pound, as sterling also rallied on the back of the dollar move. We saw the euro fall nearly 2% to hit 0.9278 this morning. The euro seemed to be under pressure itself after Germany called for its economy to con¬tract by 4% to 4.5% this year, from an assumed contraction of 2.25% in GDP earlier. There was also news that the president of the European Central Bank said yesterday that the bank’s main policy rate could go lower as the 16 nation eurozone grapples with the global economic downturn. Data at 09.00: E/Z Purchasing Managers Index
• After a bruising nine months as a punching bag for global currency markets, the Australian dollar is tak¬ing steps to regain its previous status as an outperformer. If US dollar weakness in the past week or so persists and market confidence grows in the Federal Reserve’s quantitative easing policy, then the Aus¬tralian currency may hold around current levels and could rally some more.
• China’s central bank on Monday proposed replacing the US dollar as the international reserve currency with a new global system controlled by the IMF.
These rates are for indication purposes only.
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