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Tuesday 22 February 2011

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IMS FX DAILY MORNING REPORT - Tuesday 22nd February 2011

Today's Interbank rates -

POUNDS TO US DOLLARS 1.6171
POUNDS TO EUROS 1.1916
POUNDS TO AUSTRALIAN DOLLARS 1.6138

EUROS TO US DOLLARS 1.3684
EUROS TO POUNDS 0.8391
EUROS TO AUSTRALIAN DOLLARS 1.3543

POUND HEADLINES:

Focus in the UK turns to the latest public sector finance figures. Due to a rise in VAT receipts and corporate tax revenues, it is expected public sector net borrowing to post a surplus of £1.1bn for January. This should provide a temporary distraction ahead of tomorrow's key MPC minutes, where the markets are braced for another MPC member to have joined the tightening camp.
We have had Sentance and Weale putting forward the hawkish case in the last couple of days, and we have Posen to put forward the dovish case tonight, but none of this changes anything substantive. The minutes tomorrow are the next major focus, and market gossip is assuming the vote shifted 1-5-3.
Sterling has found itself in a stronger position against the euro this morning following Weale's comments on Monday saying that a small rate rise could reduce the need for a bigger rise later.

EURO HEADLINES:

The German IFO business climate index and the Eurozone manufacturing PMI both topped expectations in February, with the latter hitting a new two-year high on surging exports and rising consumer spending. The recovery in Europe is being led by manufacturing which is, of course, something of a global theme.
The Euro continues to show tremendous resilience to bad news. Merkel's election defeat in Hamburg and the widening of yield spreads between southern Europe and the core have had little perceptible impact, with the Euro still reasonably firm across the board.
Of course, the strength of the Euro-zone data is helping, with the PMIs and the IFO data yesterday both indicating that the core continues to boom, and in the service sector as well as in manufacturing. But the upside for the Euro is limited as long as the problems of the periphery are not addressed with a comprehensive package. The effectiveness of this package could be compromised by a more reluctant Germany in the face of the election results, so risks are increasing.

US DOLLAR HEADLINES:

Although US markets were closed yesterday for the Presidents' Day holiday, there was more than enough to preoccupy markets in Europe. Ongoing tensions in the Middle East and surging gold and oil prices kept investors on the defensive.
Today we have the US consumer confidence report and house price figures which are expected to be mixed. While US sentiment is predicted to have posted a further improvement, the housing market remains the Achilles heel of the US recovery, with house prices forecast to have dropped again in December.
The USD is starting to benefit from the increase in tension in the Middle East, and there is potential for substantial USD gains, given the positioning numbers suggest the market is significantly short USD.

If you need to buy, sell or make an international payment today then please call me for a free quote.

Kris Charalambides

Tel: 0207 183 2790

Monday 21 February 2011

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IMS FX DAILY MORNING REPORT - Monday 21st February 2011

Today's Interbank rates -

POUNDS TO US DOLLARS 1.6216
POUNDS TO EUROS 1.1850
POUNDS TO AUSTRALIAN DOLLARS 1.6044

EUROS TO US DOLLARS 1.3684
EUROS TO POUNDS 0.8438
EUROS TO AUSTRALIAN DOLLARS 1.3538

POUND HEADLINES:

It's all about the MPC minutes on Wednesday and with talk swirling of a hawkish shift in MPC voting and a number of bodies calling for an imminent hike in rates, the stakes for GBP continue to remain unusually high. The not so great underlying message from January retail sales on Friday is unlikely to have dampened conviction of the Bank's rate hawks. Focus now turns the minutes on Wednesday and the Feb PMIs next week for indications whether the promising start to 2011 stayed intact in February
Sterling markets have been whipsawed over the past week by rising speculation of a near-term rise in UK interest rates. Although there was some relief that annual CPI inflation rose to 'just' 4% in January, that relief was quickly dispelled by comments for the BoE Governor in his open letter to the Chancellor.
Traders seized on those comments as an implicit acknowledgement that the MPC was getting ready to raise interest rates. Although the Governor appeared to go out of his way to play down this interpretation when he presented last week's Inflation Report, the profile of the Bank's revised inflation forecast suggests the risks of a near-term rate rise have clearly shifted.
Against this backdrop, markets will watch domestic developments closely this week, including second estimates of Q4 GDP. But given the intensity of the UK rate debate, the minutes to February's MPC meeting will be key focus.

EURO HEADLINES:

The key focus today is the release of the February eurozone PMI and German IFO business surveys. Both provide an indication of economic trends in the current quarter and are probably the most closely watched of all business surveys by economists and policymakers alike. Scheduled ECB speakers today are Draghi, Stark and Weber.
French PMI services for February comes in at 60.8 beating expectations of 58.0 and the PMI manufacturing comes in as expected at 55.3.
German PMI services for February comes in at 59.5 missing expectations of 60.2 whilst manufacturing PMI comes in at 62.6 smashing expectations of 60.3.
Eurozone PMI services for February has come in at 57.2 beating expectations of 55.9 & PMI has also beat expectations helping the Euro gain some momentum this morning.
The German IFO has come in as expected showing an improvement for February. Significantly, notwithstanding prospects of German government spending cuts and a modest slowdown in Chinese growth, the expectations component is holding up very well, thanks to a pick-up in domestic demand led by a relatively resilient labour market.

US DOLLAR HEADLINES:

The short-term continues to look ominous for the dollar index and even as we move into a 5th straight day of selling and violence escalates in North Africa/Middle East, technically the picture does not yet look oversold. US markets are close today so liquidity could be poor, a reason perhaps for investors to test support in the 77.643 area.
The pound rose to a two-week high against the dollar on Friday following strong UK retail sales data. The pound/dollar has moved away from its high but is continuing to hold above $1.62.
Tomorrow for the US we have S&P Case-Schiller House Price, Consumer Confidence and Richmond Fed Manufacturing Index.

If you need to buy, sell or make an international payment today then please call me for a free quote.

Kris Charalambides

Tel: 0207 183 2790

Friday 18 February 2011

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IMS FX DAILY MORNING REPORT - Friday 18th February 2011

Today's Interbank rates -

POUNDS TO US DOLLARS 1.6198
POUNDS TO EUROS 1.1946
POUNDS TO AUSTRALIAN DOLLARS 1.6031

EUROS TO US DOLLARS 1.3558
EUROS TO POUNDS 0.8370
EUROS TO AUSTRALIAN DOLLARS 1.3419

POUND HEADLINES:

Bank of England monetary policy committee member Andrew Sentance has put further pressure on colleagues over high UK inflation in a speech. He questioned claims that unemployment and spare capacity in the UK economy would slow down price rises, which he instead blamed on strong global demand. Mr Sentance has been voting for an interest rate rise since June.
UK retail sales rebounded in January after heavy snow caused a big drop in December sales, latest figures have shown. The volume of retail sales in January rose 1.9% on the previous month. Decembers monthly figure was also revised downwards to show a 1.4% monthly drop - the biggest December fall since records began.
UK mortgage lending fell by 13% in January compared with December to the lowest level for a year at £9.2bn, lenders have said this morning. The mortgage market is likely to remain constrained in the coming months reflecting the sluggish state of the UK economy as a whole, as well as lack of demand.
The Pound rose yesterday, following Andrew Sentance's bullish comments on interest rates. In trading this morning sterling is continuing to stretch its rally following strong Retail sales data bringing the price back above 1.19.

EURO HEADLINES:

Reminding us that inflationary pressures are not just a UK phenomena, German PPI for January is expected to show a rise of 0.7% from the previous month, taking the annual increase to 5.2%.
The ECB will be keeping a close eye to ensure that such increases do not lead to an entrenchment of increased wage expectations, driving consumer prices higher. CPI inflation in the 17 nation eurozone
reached 2.4% year-on-year in January, while German reached 2.0%, both above the ECB's target of just under 2.0%.
Germany has warned that the eurozone's future bail-out fund must not become a "regional development fund", despite Europe's widely diverging economies. Next month the EU plans to finalise the rules for the new permanent fund - the European stability Mechanism (ESM).
Spain's auctions were marginally disappointing yesterday, raising a little less than expected, but Portugal was an even bigger underperformer as rumours circulated that they were being pressured to accept a bailout. The big rise in the use of the ECB's marginal lending facility was also apparently EUR negative, but EUR weakness was very selective, only really showing up against the CHF.

US DOLLAR HEADLINES:

US prices rose 0.4% in January compared with the previous month, mostly due to rising food and fuel prices. The rate of change was the same as seen in December.
The USD was soft through yesterday's trading in spite of the strongest Philadelphia Fed survey since 2004, and the apparent increase in geopolitical concern apparent in declining yields in the US and elsewhere.
The USD for the moment appears to have lost its safe haven status, with the CHF and NOK seemingly the best performers on risk negative news, and even the AUD performing well yesterday.

If you need to buy, sell or make an international payment today then please call me for a free quote.

Kris Charalambides

Tel: 0207 183 2790

Thursday 17 February 2011

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IMS FX DAILY MORNING REPORT - Thursday 17th February 2011

Today's Interbank rates -

POUNDS TO US DOLLARS 1.6126
POUNDS TO EUROS 1.1877
POUNDS TO AUSTRALIAN DOLLARS 1.6065

EUROS TO US DOLLARS 1.3577
EUROS TO POUNDS 0.8419
EUROS TO AUSTRALIAN DOLLARS 1.3526

POUND HEADLINES:

After the excitement generated by Mervyn King's letter to the Chancellor on Tuesday, yesterday's inflation Report and in particular King's comments at the press conference were more balanced on the outlook for interest rates than many had expected. The Governor stressed that the outlook for inflation remained highly uncertain. Reading between the lines this implies that a near term rate hike is not a done deal, although it does seem that the balance of opinion on the MPC is becoming more hawkish. Next weeks minutes for the February meeting should provide some further indication of the extent to which the consensus has moved.
UK unemployment rose by 44,000 to almost 2.5 million in the three months to the end of December. The unemployment rate is now 7.9%, with youth unemployment running at 20.5%. The number of people claiming Jobseeker's Allowance also increased, by 2,400 last month to 1.46 million.
On Friday we have Retail Sales data.

EURO HEADLINES:

Spain's long-dated bond auctions will attract attention but the long-term commitment of China to support Iberian debt means that, relative EU spread differentials aside, supply should pass without too many glitches.
Jens Weidmann has been named to take over the helm of the Bundesbank, running the central bank of Germany in Europe's strongest economy. As the head of the Bundesbank Weidmann is expected to have a strong voice at the ECB.
Tomorrow we have German PPI figures.

US DOLLAR HEADLINES:

The PPI figures for the US published yesterday showed a second successive rapid rise. However, this was mostly down to a big hike in the food and energy component reflecting the run up in oil and agricultural prices. More positively there was little sign of this being passed through into a more general rise in prices. It is expected a similar story will come out of today's CPI data. The headline figure is expected to be up by 0.4% on the month.
However, despite their concerns about the increase in producer prices, analysts said that there were a number of other factors helping to keep a lid on inflation. On Wednesday, separate figures showed that industrialproduction slipped in January, and signals from the housing sector have been mixed recently. At the same time, the unemployment rate is proving difficult to bring down. Last week, the Federal Reserve chairman Ben Bernanke said the US unemployment rate would not return to pre-financial crisis levels for "several years".
Initial Claims and Philly Fed survey likely to be the movers of the day unless the jump in PPI is repeated in CPI.

If you need to buy, sell or make an international payment today then please call me for a free quote.

Kris Charalambides

Tel: 0207 183 2790

Wednesday 16 February 2011

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IMS FX DAILY MORNING REPORT - Wednesday 16th February 2011

Today's Interbank rates -

POUNDS TO US DOLLARS 1.6145
POUNDS TO EUROS 1.1913
POUNDS TO AUSTRALIAN DOLLARS 1.6141

EUROS TO US DOLLARS 1.3549
EUROS TO POUNDS 0.8399
EUROS TO AUSTRALIAN DOLLARS 1.3547

POUND HEADLINES:

A choppy day for sterling markets yesterday, as initial relief that the January CPI came in at 'just' 4.0% gave way to fears of a near term rate hike following comments in the BoE Governor's latest open letter to the Chancellor. The Bank of England Governor appeared to give credence to the market's view that the MPC will raise interest rates by 25bp by May, noting that 'under the assumption that Bank rate increases in line with market expectations' inflation is as likely to be above 2% as below over the medium term. However, the letter was not an unequivocal endorsement of this view.
Focus now turns to today's all-important inflation report for a clearer steer on the policy outlook. Although Governor King has already given a strong clue as to the profile of its pivotal inflation fan chart, the tone of the report and, more importantly, the comments made by king in the accompanying press conference will be instrumental in guiding market sentiment. Expect another choppy day.
UK unemployment rose by 44,000 to almost 2.5 million in the three months to the end of December. The UK unemployment rate is now 7.9%. The number of people claiming Jobseekers Allowance increased by 2,400 last month to 1.46 million.

EURO HEADLINES:

The Euro may have benefited slightly from the agreement that the ESM will have a full EUR 500bn to play with, though this was hardly unexpected, and isn't relevant until 2013. Weaker year-on-year Greek GDP growth is perhaps more relevant, but as the market is already assuming some sort of Greek restructuring, didn't have a significant impact.
The eurozone economy grew by 0.3% in the final quarter of 2010, slightly weaker than expected. This was the second quarter of 0.3% growth in the 16 countries using the euro at the time.
The growth figure for the 27 countries that make up the EU as a whole was 0.2% in the fourth quarter. For 2010 as a whole, GDP increased by 1.7% in both the eurozone area and the full EU area.

US DOLLAR HEADLINES:

In the US, the main focus today will be the January PPI report. We expect PPI inflation to have slowed from an annual 4.0% in December to 3.5%, with the core rate at just 1.2%.
US housing starts and industrial production are also due. These are expected to confirm that the expansion continues apace, with housing starts forecast to rise to 555k and IP by 0.7%m/m. This will be the first with the new (more hawkish) voting panel.
US sales rose by 0.3%, less than analysts' expectations of a 0.6% increase, as extreme weather in large parts of the country kept some shoppers at home. On an annual basis retail sales were up 7.8% from January 2010.

If you need to buy, sell or make an international payment today then please call me for a free quote.

Kris Charalambides

Tel: 0207 183 2790

Tuesday 15 February 2011

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IMS FX DAILY MORNING REPORT - Tuesday 15th February 2011

Today's Interbank rates -

POUNDS TO US DOLLARS 1.6054
POUNDS TO EUROS 1.1865
POUNDS TO AUSTRALIAN DOLLARS 1.6006

EUROS TO US DOLLARS 1.3530
EUROS TO POUNDS 0.8427
EUROS TO AUSTRALIAN DOLLARS 1.3490

POUND HEADLINES:

Today's economic calendar is a busy one with UK CPI inflation taking centre stage. The UK CPI numbers have the capacity to be a big market mover, particularly ahead of tomorrow's key Bank of England Inflation Report.
It is expected higher food and energy prices to have lifted the annual CPI up from 3.7% to 4.0% in January, in line with the market consensus. The big uncertainty is how much of the VAT increase at the start of the year has already been passed on by retailers, and how this compares with the impact of the 2.5ppt VAT increase in January 2011.
Looking ahead of the week we also have Unemployment, CBI Trends Total Orders and Retail sales figures

EURO HEADLINES:

Eurozone GDP Q4 figures were released this morning which have showed that both the French and German economies both grew in the fourth quarter of 2010, but by slightly less than expected.
In Germany, the economy grew by 0.4% in the final three months of the year. For 2010 as a whole, the German economy grew by 3.6%
The German ZEW survey will also be released later this morning. It is expected that this will show further signs of recovery.

US DOLLAR HEADLINES:

In the US the calendar is dominated by January retail sales and the February Empire manufacturing surveys. Robust improvements are forecast in both, further raising the upside risks to Q1 GDP.
US President Obama has unveiled his 2012 budget, describing the proposal as a "down payment" on future cuts to the US budget deficit. The budget aims to cut $1.1tn from the US deficit over a decade.
Towards the end of the week we have CPI and Philadelphia Fed Survey.

If you need to buy, sell or make an international payment today then please call me for a free quote.

Kris Charalambides