Foreign Currency Exchange Report 18 March 2010

Sterling

The Sterling exchange rate rallied back strongly against the major currencies yesterday morning after the UK unemployment figures were published.  The number of unemployed people fell again leaving the rate at 7.8%.  Positive movements within the economy pushed the Pound up across the board.  Sterling has been very weak for the last few weeks and this is mainly due to politics.  With the uncertainty of a hung parliament looming, the Pound exchange rate has been fairly weak since we had the release of the election figures a couple of weeks back.  Whichever way it goes, a hung parliament is now very likely which means that a new government will struggle to put through the economic reform needed to tackle our huge budget deficit.  As we move forward towards May 6^th, this will weigh on the Pound more and many predict Sterling to weaken over the coming months.

Meanwhile, the Bank of England meeting minutes showed the governing board voted unanimously to keep the benchmark interest rate at 0.50% and to maintain the asset purchase target at £200B, ‘while some members considered that the upside risks to inflation had increased slightly over the month'. This was a comment from a BoE spokesman about the fragile state of the economy.

Data Releases

CBI Industrial Trends   1100

BoE speech at Chambers of Commerce

Euro

The Euro exchange rate weakened yesterday mid-morning after a German government spokesman said that no decision from the European Union has been made on aid to help Greece.  The spokeswomen went onto say that a decision at next week's EU summit would be unlikely. Greece is struggling to cut back its huge budget deficit and as yet has asked for no help which is resulting in no decision at this time for the EU to wade in and help them out.  With the state of the Euro uncertain we could expect to see quite a volatile currency until the problem in Greece is resolved.  Stay in touch with your currency broker if you have any upcoming transactions as you will need to be involved in likely movement.

Date Releases

Euro-zone Trade balance 1000

US Dollar

After the FOMC meeting on Tuesday night where the FED decided to keep interest rates at a record low for the time being, we have seen the US Dollar exchange rate weaken.  The FED indicated that recent data releases draw a mixed picture about the state of the economy.  Although the jobs market is improving in the US, other areas of the economy are still under pressure.  Yesterday afternoon US producer prices fell by more than expected for the month of February. This in turn saw the market lose ground against its major counterparts.  The US Dollar is the most highly traded market in the world. With mounting pressure on the economy, do not be surprised if we continue to see the market weaken off.

Data Release

Initial Jobless Claims 1230
FED speakers to Bankers in Washington 1230
USD Philadelphia Fed 1400

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