Foreign Currency Exchange Report 4 March 2010

Sterling

The Pound exchange rate rebounded strongly across the board on Wednesday, notably against the US Dollar, ahead of today's Bank of England meeting. Stronger UK economic data also helped to drive the Pound higher. Unlike the manufacturing and construction sector, the service sector expanded by the fastest pace in 7 months while consumer confidence rose to a 2 year high. Some investors are speculating that these positive reports will hold the Central Bank back from increasing Quantitative Easing this month which allowed the Pound to post gains.

With the BOE's Monetary Policy Committee announcing the outcome of their meeting at noon, there is certainly a lot of opportunity for volatility in todays trading. An expansion of QE past the £200 billion mark will almost certainly see Sterling drastically sold off, whilst if it remains unchanged a rally is certainly possible.  If you have Sterling to buy or sell then you should get in touch with your currency broker to ensure that whatever the outcome, you do not incur losses.  Also released this morning were the Halifax House Price Index figures.

Euro

For the second day in a row, the Euro exchange rate recovered against the US Dollar as traders continued to erase short positions ahead of today's Monetary Policy meeting. The European Union appears to be satisfied with Greece's new austerity package and apparently Euro traders are as well. The Greek government plans to reduce the deficit by Euros 4.8 billion through higher taxes on tobacco, alcohol and sales taxes along with holiday pay cuts for government workers. However economic data did not contribute to the rally in the Euro exchange rate. German retail sales remained flat in January which was better than the market's forecast. However, on an annual basis, retail sales fell 3.4 percent, The sharpest drop since March and 3 times worse than market expectations. The European Central Bank will be delivering a Monetary Policy announcement today at 12.45 and even though interest rates are not expected to change, the ECB could announce additional plans to end emergency measures.

Ahead of the ECB's interest rate decision this afternoon the Euro has surrendered some of yesterday's gains and this morning sees the release of Q4 2009 GDP revised figures.  If you have a Euro trade to make be sure to keep in touch with your currency broker as today looks to be very volatile.

US Dollar

The US Dollar exchange rate struggled on Wednesday, surrendering ground to both the Pound and Euro as investors became weary ahead of this Friday's Non-farm Payroll figures.  Estimates ahead of the release vary wildly and the Dollar exchange rate traded lower as traders adjusted their positions.  This move was supported by the release of the FED's Beige Book which reported that 9 out of the 12 FED districts saw an improvement in their local economies. At 75 percent of the sample this is comprehensive enough to indicate that the US economy as a whole is moving in the right direction. However, concerns over the state of the US labor market weighed on the Dollar, a worrying sign ahead of one of the most important releases of the month. Employment has been stubbornly trudging through negative territory, and according to the Beige Book, there is a serious chance that job losses exceeded job growth once again in February.

The US Dollar exchange rate has strengthened back in this morning's trading ahead of the announcement of Jobless Claims. Factory Orders and Pending Homes Sales figures come out this afternoon.

Please contact Foreign Currency Exchange on +44 (0) 20 7989 0000 to discuss your currency exchange requirements.