UK Nationwide confidence index falls to 11-month low – 16/06/2010

• Sterling flat at $1.4795, near 1-month highs
• UK Nationwide confidence index falls to 11-month low
• Further drop in UK jobless claimant count seen

Sterling was supported on Wednesday after hitting a one-month high against the dollar the previous day, benefiting from a global retreat in extreme risk aversion and on some brighter signs for Britain. Market players anticipated a slight improvement in UK jobs data, with another fall in claimant count unemployment although perhaps less than in previous months. The pound retreated after data showed UK building society Nationwide’s consumer confidence index fell to 65 in May, the lowest reading since June last year, from an upwardly revised reading of 75 in April. But sterling swiftly recovered, rising to a session high of $1.4823, not far from Tuesday’s peak of $1.4838, its highest since mid-May.

By 0715 GMT, it was flat on the day at $1.4795. Against the euro, the pound was little changed at 83.32 pence.

Market players have taken heart from the new government’s attempts to rein in the fiscal deficit, with more spending cuts expected in an emergency budget to be unveiled next week. UK finance minister George Osborne looks set to announce on Wednesday sweeping new powers for the Bank of England to police the financial sector and prevent another credit crisis.

In his first “Mansion House” speech to the City of London’s finance elite since taking office last month, the Chancellor of the Exchequer is expected to say that ultimate responsibility for financial supervision should lie with the central bank.
Osborne is also expected to confirm he will press ahead with a levy on banks, which has been promised by Britain’s coalition government, but details are only likely to come in next week’s budget.

Exchange Rates:

GBP – EUR: 1.2036 GBP – JPY: 135.93 CAD – USD: 0.9757
GBP – USD: 1.4821 EUR – USD: 1.2353 GBP – ZAR: 11.271
GBP – AED: 5.444 EUR – JPY: 113.31 AUD – USD: 0.8657
GBP – CHF: 1.6790 EUR – AUD: 1.4281 GBP – NZD: 2.1328
GBP – AUD: 1.7150 EUR – NZD: 1.7761 GBP – CAD: 1.5204
JPY – USD: 0.0109

The rates above are for indication purposes only. Price can vary dramatically based on amount and delivery date.

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Key Sources: Currencies 4 You, Bloomberg, Reuters, Daily FX

UK inflation seen easing from April’s peak – 15/06/2010

• Sterling down 0.1 percent at $1.4713
• UK inflation seen easing from April’s peak

Sterling eased on Tuesday from one-month peaks hit against the dollar the previous day, but the currency retained support as the market sought direction from inflation data due out shortly. Economists expect UK inflation to have slowed to 3.5 percent year on year in May from 3.7 percent in April, keeping it above the Bank of England’s 2 percent target for a sixth month running. While the BoE has said it expects the spike to be temporary and thus is expected to make no quick change to its extremely loose monetary policy, concerns about the rate of inflation have been growing among some policymakers.

Andrew Sentance, one of the hawks on the nine-member Monetary Policy Committee, said this weekend the resilience of inflation so far raised the issue of how long a highly expansionary monetary policy would remain appropriate. A higherthan-expected reading in the inflation data may spur the pound higher, analysts said. The data is due out at 0830 GMT.

At 0721 GMT, the euro was down 0.2 percent at 82.71 pence. Against the dollar, the pound was little changed on the day at $1.4713, having risen as far as $1.4810 on Monday, its highest since mid-May.

Earlier, a survey by the Royal Institution of Chartered Surveyors showed British house prices rose last month at their fastest rate so far this year.

Exchange Rates:

GBP – EUR: 1.2100 GBP – JPY: 135.32 CAD – USD: 0.9703
GBP – USD: 1.4765 EUR – USD: 1.2231 GBP – ZAR: 11.346
GBP – AED: 5.424 EUR – JPY: 112.10 AUD – USD: 0.8598
GBP – CHF: 1.6920 EUR – AUD: 1.4312 GBP – NZD: 2.1355
GBP – AUD: 1.7296 EUR – NZD: 1.7670 GBP – CAD: 1.5256
JPY – USD: 0.0109

The rates above are for indication purposes only. Price can vary dramatically based on amount and delivery date.

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Key Sources: Currencies 4 You, Bloomberg, Reuters, Daily FX

UK Office for Budget Responsibility forecasts in focus – 14/06/2010

• Sterling up vs dlr on better risk appetite, BoE comments
• BoE’s Sentance: high inflation poses rates dilemma
• UK Office for Budget Responsibility forecasts in focus

Sterling rose against the dollar on Monday, lifted by hawkish comments from Bank of England policymakers warning of rising inflation and highlighting the possibility of UK interest rates rising later this year. The pound rose in tandem with gains in the euro against the dollar and in equities on renewed optimism about the global economic outlook.

Investors were cautious, however, ahead of the release of growth and borrowing forecasts from the newly created Office for Budget Responsibility at 0900 GMT, which will shed light on how tough the British government’s austerity drive is likely to be. BoE policymaker Andrew Sentance said in an article in the Sunday Times newspaper that Britain’s economic recovery and resilient inflation questioned how long a highly expansionary monetary policy would remain appropriate. The BoE’s chief economist Spencer Dale also said the UK’s economic recovery was likely to gather pace this year and highlighted a risk that inflation could stay higher for longer. Inflation data is due on Tuesday. Although it is expected to show the headline annual CPI rate dipping to 3.5 percent in May, this would still be well above the BoE’s 2 percent target.

At 0801 GMT, sterling rose 0.8 percent against the dollar to $1.4652 as improved sentiment towards riskier assets hit the safe-haven U.S. dollar and prompted short-covering in sterling and the euro. Traders said talk of offers at around $1.4680 and $1.4700 may help cap gains, however. The euro fell 0.2 percent to 83.06 pence. While below resistance at 84.00 pence,gains for the euro should be limited, technical analysts said.

Investors remained cautious, however, due to concerns about how the UK will weather sizeable fiscal tightening to come, with Commodity Futures Trading Commission data showing speculators boosted bets against sterling in the week to June 8.

Monday’s forecasts from the fiscal policy watchdog are expected to pour cold water on the previous Labour government’s hopes for a powerful recovery and hint at the scale of spending cuts and tax hikes the new government will seek to implement. The forecasts come ahead of next week’s budget presentation by Finance Minister George Osborne.

Exchange Rates:

GBP – EUR: 1.2044 GBP – JPY: 135.00 CAD – USD: 0.9717
GBP – USD: 1.4682 EUR – USD: 1.2207 GBP – ZAR: 11.248
GBP – AED: 5.393 EUR – JPY: 112.22 AUD – USD: 0.8581
GBP – CHF: 1.6771 EUR – AUD: 1.4274 GBP – NZD: 2.116
GBP – AUD: 1.7142 EUR – NZD: 1.7626 GBP – CAD: 1.5145
JPY – USD: 0.0109

The rates above are for indication purposes only. Price can vary dramatically based on amount and delivery date.

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Key Sources: Currencies 4 You, Bloomberg, Reuters, Daily FX

No change expected at 1100 GMT BoE rate decision – 10/06/10

• Sterling rises above $1.4600 vs dollar
• Further gains capped by strong Asian selling
• No change expected at 1100 GMT BoE rate decision

Sterling rose against the dollar on Thursday after being knocked by ratings agency comments earlier in the week, as investors took the view that bad news was largely priced in, but gains were capped by Asian selling.

Traders were readying for a Bank of England’s interest rate decision, due at 1100 GMT.

The pound rose briefly above $1.4600 against the greenback on Wednesday as investors bought back the currency, taking the view it was oversold after Fitch Ratings highlighted concerns over Britain’s hefty budget deficit. Early dealing on Thursday saw another test of the $1.4600 area, with sterling extending its recovery off post-Fitch lows of $1.4346 to $1.4621. Traders reported Middle Eastern demand but said further gains were limited by strong offers from a major Asian sovereign account. At 0737 GMT, the pound was trading up around 0.3 percent at $1.4585. Versus the euro, it was broadly unchanged at 82.50 pence, having risen to an 18-month high earlier in the week at 82.11, driven largely by concerns over the health of the euro zone financial system.

The BoE is due to announce its latest decision on interest rates at 1100 GMT, with the consensus for no change from the current record low of 0.5 percent. The central bank is also expected to stick with a pause in its asset purchase programme. The new coalition government is set to announce a round of spending cuts when on June 22 it delivers its first budget since coming to power, leading to concerns that Britain’s fledgling economic recovery may be hampered.

Exchange Rates:

GBP – EUR: 1.2146 GBP – JPY: 133.16 CAD – USD: 0.9637
GBP – USD: 1.4618 EUR – USD: 1.2063 GBP – ZAR: 11.361
GBP – AED: 5.370 EUR – JPY: 110.02 AUD – USD: 0.8394
GBP – CHF: 1.6752 EUR – AUD: 1.4501 GBP – NZD: 2.1765
GBP – AUD: 1.7589 EUR – NZD: 1.7940 GBP – CAD: 1.5187
JPY – USD: 0.0110

The rates above are for indication purposes only. Price can vary dramatically based on amount and delivery date.

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Key Sources: Currencies 4 You, Bloomberg, Reuters, Daily FX

Gains limited after Fitch highlights UK deficit problems – 09/06/2010

• Sterling lifts off day’s low vs dollar as stocks rise
• Gains limited after Fitch highlights UK deficit problems
• Traders cite UK bank, Mideast demand supporting cable

Sterling pared losses against the dollar on Wednesday, tracking an early rise in European and UK shares, but gains were limited after a ratings agency highlighted Britain’s hefty budget deficit the previous day. A 0.5 percent rise in UK shares
helped the pound to recover early losses, while traders said demand from a UK bank and Middle Eastern names in early European trade also propped up the UK currency versus the dollar. Sterling pulled back from losses suffered on Tuesday, when Fitch said Britain faced challenges to cut government borrowing and needed a more ambitious plan to reduce the deficit, which stands at around 11 percent of economic output. But analysts say the currency will stay on the back foot due to concerns about the deficits, while investors await the new government’s emergency budget later in the month.

By 0726 GMT, sterling traded flat on the day at $1.4474 after falling to the day’s low of $1.4394. The pound fell as low as $1.4346 on Tuesday after the Fitch statement. The euro slipped slightly to 82.66 pence and hovered near an 18-month low
of 82.11 pence hit earlier this week, as the euro remained weak due to concerns about how much euro zone debt problems will impact growth in the region. Some traders said they were short on the euro against sterling following its latest sell-off and were waiting for opportunities to cover some of those positions.

Investors are focused on Britain’s deficits as it struggles to recover from recession. Data on Wednesday showed job growth slipped in May for the second consecutive month as public sector cuts began to take effect. Separate figures from the British Retail Consortium showed shop price inflation eased as retailers used discounting and promotions to encourage customers to spend more.

The Bank of England begins a two-day monetary policy meeting later in the day, and is widely expected to keep interest rates chained to a record low 0.5 percent when its announces its decision on Thursday.

Exchange Rates:

GBP – EUR: 1.2100 GBP – JPY: 132.64 CAD – USD: 0.9554
GBP – USD: 1.4486 EUR – USD: 1.1978 GBP – ZAR: 11.209
GBP – AED: 5.321 EUR – JPY: 109.67 AUD – USD: 0.8280
GBP – CHF: 1.6681 EUR – AUD: 1.4560 GBP – NZD: 2.1794
GBP – AUD: 1.7581 EUR – NZD: 1.8047 GBP – CAD: 1.5177
JPY – USD: 0.0109

The rates above are for indication purposes only. Price can vary dramatically based on amount and delivery date.

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Key Sources: Currencies 4 You, Bloomberg, Reuters, Daily FX

Speculation Prudential still needs to buy the pound – 08/06/2010

• Sterling rises 0.3 pct vs dollar on short covering rally
• Market cautiously positive on govt plans to tackle deficit
• Speculation Prudential still needs to buy the pound

Sterling rose against the dollar on Tuesday, tracking a rise in the euro as investors took profit from recent moves, with the market cautiously positive on the government’s determination to tackle Britain’s large deficit. Traders also cited talk Prudential still needed to buy back sterling following the collapse of its bid for AIG’s Asian arm. They said it was unwinding currency hedges taken out in anticipation of the deal going through, in which the pound was sold for dollars.

Gains for sterling were limited, however, with the market wary about the potential impact of large spending cuts on economic growth. Worries about euro zone debt problems also kept investors wary of buying riskier currencies, including sterling. He added that with the market wary about taking on risk, sterling was vulnerable to falls against safe-haven currencies like the dollar and the yen, but may gain versus the euro, with euro zone debt problems seen more severe than those in Britain. Prime Minister David Cameron told Britons on Monday the scale of the country’s budget problems was even worse than he had anticipated and cited crisis-hit Greece as an example of the risk of failing to act.

At 0752 GMT, sterling rose 0.3 percent against the dollar to $1.4507, rebounding after the pound dropped as low as $1.4388 on Monday and in tandem with a short-covering rally in euro/dollar after it hit a four-year low on Monday. The latest data from the Commodity Futures Trading Commission showed currency speculators trimmed net short positions on sterling to 70,454 contracts in the week to June 1 from 75,079 the previous week. The euro rose 0.1 percent to 82.43 pence, though it was not far from the low of 82.11 hit on Monday, a level not seen since November 2009. Technical traders said the 81.95/70 area was the next support zone to watch, representing the October 2008 high and the 50 percent retracement of the 2007-2008 uptrend.

Analysts said support for sterling also came from a British Retail Consortium survey showing like-for-like retail sales rose 0.8 percent last month, although consumers were still reluctant to make major purchases.

Exchange Rates:

GBP – EUR: 1.2144 GBP – JPY: 133.37 CAD – USD: 0.9507
GBP – USD: 1.4527 EUR – USD: 1.1981 GBP – ZAR: 11.323
GBP – AED: 5.336 EUR – JPY: 110.05 AUD – USD: 0.8215
GBP – CHF: 1.6891 EUR – AUD: 1.4737 GBP – NZD: 2.1982
GBP – AUD: 1.7890 EUR – NZD: 1.8119 GBP – CAD: 1.5356
JPY – USD: 0.0109

The rates above are for indication purposes only. Price can vary dramatically based on amount and delivery date.

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Key Sources: Currencies 4 You, Bloomberg, Reuters, Daily FX

Sterling gains, helped by housing data – 03/06/2010

• Sterling gains, helped by housing data, equity gains
• Nationwide says UK house prices rose 0.5 pct m/m in May
• UK services PMI data awaited at 0828 GMT

Sterling rose against the dollar and the euro on Thursday, helped by a survey showing a rise in UK house prices, while a rebound in equities boosted perceived higher risk currencies, including the pound. House prices in Britain rose by 0.5 percent in May, half the rate of the previous two months but enough to lift property values within 10 percent of their 2007 peak, a survey by the Nationwide building society showed.

Investors awaited the release of the purchasing managers’ survey on UK services sector activity at 0828 GMT, forecast to rise to 55.50 in May from 55.30 in April. Coming in the wake of a construction PMI report on Wednesday, which showed the fastest expansion in the sector since September 2007, analysts said a strong services PMI reading could give the pound a further boost. Although concerns remain about the outlook for the UK, particularly its high debt levels, investors are increasingly confident the economy will fare better than the euro zone, allowing sterling to make further gains versus the euro.

At 0740 GMT, sterling was up 0.3 percent against the dollar at $1.4703, while the euro dipped 0.1 percent to 83.50 pence, staying shy of an 18-month low of 82.80 pence hit on Wednesday. Sterling was helped by a 1.5 percent rise in UK shares, which tracked broad gains in equities globally as Wednesday’s strong U.S. pending home sale stoked optimism about the global economic recovery ahead of the release of U.S. jobs data on Friday. Equity gains pressured the low-yielding yen in particular as investors sought riskier assets, helping push sterling to a three-week high against the Japanese currency of 136.24 yen. Some traders pointed to comments on Wednesday by President Barack Obama, who said he expected the May employment report would show strong growth in U.S. payrolls.

Sterling fell on Wednesday after the one-off positive currency effects from the collapse of Prudential’s $35.5 billion bid for AIG’s Asian arm subsided, but analysts said a solid PMI number could give the currency fresh momentum.

Exchange Rates:

GBP – EUR: 1.1988 GBP – JPY: 136.20 CAD – USD: 0.9658
GBP – USD: 1.4741 EUR – USD: 1.2326 GBP – ZAR: 11.266
GBP – AED: 5.415 EUR – JPY: 114.00 AUD – USD: 0.8518
GBP – CHF: 1.6989 EUR – AUD: 1.4569 GBP – NZD: 2.154
GBP – AUD: 1.7425 EUR – NZD: 1.8009 GBP – CAD: 1.5294
JPY – USD: 0.0108

The rates above are for indication purposes only. Price can vary dramatically based on amount and delivery date.

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Key Sources: Currencies 4 You, Bloomberg, Reuters, Daily FX

Analysts eye further gains as market chases the move – 02/06/2010

• Sterling rises broadly as Pru/AIG deal aborted
• Pound at 18-mth high vs euro, 4-month trade-weighted high
• Analysts eye further gains as market chases the move

Sterling rose broadly on Wednesday as the collapse of Prudential’s attempt to buy AIG’s Asian arm prompted unwinding of currency hedges put in place in anticipation of a deal.

British insurer Prudential plc is withdrawing from a $35.5 billion deal to buy American International Group Inc’s Asian life insurance business AIA. Sterling rose broadly on Tuesday on growing anticipation the deal was close to collapse. Traders said Prudential had put in place a series of currency hedges, selling sterling against the dollar, when the initial bid was announced in March and these positions would need to be unwound.

At 0735 GMT, sterling was up around 0.7 percent versus the dollar at $1.4755, having risen more than 1 percent on Tuesday to a high of $1.4723. Traders noted good demand for $1.4805 overnight sterling calls in the options market.

Versus the euro, sterling extended 18-month highs to 82.80 pence. Traders said there were significant stop-loss orders building underneath that level. Sterling rose to a four-month high versus a currency basket at 80.80, according to Bank of England data.

UK data scheduled for release at 0830 GMT includes BOE consumer credit figures for April, seen easing slightly to stg0.3bn in a Reuters poll. UK April money supply and mortgage approvals/lending figures are also due.

Exchange Rates:

GBP – EUR: 1.2073 GBP – JPY: 135.40 CAD – USD: 0.9522
GBP – USD: 1.4767 EUR – USD: 1.2261 GBP – ZAR: 11.379
GBP – AED: 5.424 EUR – JPY: 112.48 AUD – USD: 0.8375
GBP – CHF: 1.7075 EUR – AUD: 1.4731 GBP – NZD: 2.1851
GBP – AUD: 1.7757 EUR – NZD: 1.8142 GBP – CAD: 1.5556
JPY – USD: 0.0109

The rates above are for indication purposes only. Price can vary dramatically based on amount and delivery date.

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Key Sources: Currencies 4 You, Bloomberg, Reuters, Daily FX

Pound weighed down by BP losses after “top kill” failure – 01/06/2010

• Sterling slides vs dollar, rises vs broadly suffering euro
• Pound weighed down by BP losses after “top kill” failure
• Market awaits UK PMI at 0828 GMT

Sterling fell against the dollar on Tuesday, tracking losses in the euro as the single currency came under selling pressure on concerns about bad loans held by euro zone banks. Broad weakness in the euro drove the single currency to a one-year low against the pound.

Sterling also took a hit from a fall in UK equities, which were led lower by a fall in BP Plc shares after its “top kill” procedure to halt an oil leak in the United States failed. Analysts said the euro’s roughly 1 percent slide versus the dollar helped drive sterling lower.

Investors awaited UK manufacturing data later in the day. The purchasing managers’ index is expected to come in at 57.8 in May, slightly lower than 58.0 the previous month.

By 0731 GMT, sterling had fallen 0.6 percent on the day to $1.4450. A near 2 percent fall in UK shares helped to drive the pound lower. The dollar rose 0.5 percent versus a currency basket, led by gains against the euro, which was hit by a warning from the European Central Bank on Monday that euro zone banks faced up to 195 billion euros in a “second wave” of potential loan losses over the next 18 months. The single European currency hit a one-year low against sterling of 84.15 pence.

Despite sterling’s losses against the dollar, market participants said its slide was limited by signs that a takeover deal between UK insurer Prudential and American International Group’s Asian life insurance unit may be under threat.

London traders brushed off the resignation of a UK treasury minister at the weekend, just days into the new government’s term, as analysts said the issue was unlikely to dampen the government’s efforts to rein in the country’s deficits.

Exchange Rates:

GBP – EUR: 1.1920 GBP – JPY: 132.65 CAD – USD: 0.9593
GBP – USD: 1.4541 EUR – USD: 1.2307 GBP – ZAR: 11.246
GBP – AED: 5.341 EUR – JPY: 112.29 AUD – USD: 0.8475
GBP – CHF: 1.6898 EUR – AUD: 1.4666 GBP – NZD: 2.1554
GBP – AUD: 1.7451 EUR – NZD: 1.8150 GBP – CAD: 1.5250
JPY – USD: 0.0110

The rates above are for indication purposes only. Price can vary dramatically based on amount and delivery date.

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Key Sources: Currencies 4 You, Bloomberg, Reuters, Daily FX

Pound driven by shifts in risk appetite – 28/05/10

• Sterling virtually flat vs dlr and euro
• Pound driven by shifts in risk appetite
• Month-end flows in focus ahead of UK holiday

Sterling steadied in tandem with equity markets on Friday, driven by the market’s overall view of risk appetite and monthend flows ahead of a long weekend in the UK. A light data calendar left the market focusing on external factors, primarily movements in risk and equity markets, with traders also keeping an eye of the latest developments in Prudential’s bid for AIG’s main Asian life insurance assets.

At 0735 GMT, sterling was trading with slight losses versus the dollar at $1.4540, having risen to a two-week high the previous day at $1.4608. European stocks were trading close to flat in early trading.

The pound briefly hit a two-week high against the dollar on Thursday as traders took advantage of talk that UK insurer Prudential’s $35.5 billion bid for U.S. rival AIG’s Asian unit may be off the table. Shares of Prudential Plc rose 1.69 percent when trading in Hong Kong resumed on Friday, after being suspended in the morning, following the company’s confirmation it was seeking to renegotiate the purchase price of AIG’s main Asian life insurance assets. Traders had sold the pound aggressively when details of its initial $35.5bn bid emerged on March 1.

Versus the euro, the pound was also steady at 84.80 pence having risen to an 11-month high on Thursday of 84.22, a move driven largely by persistent structural concerns over the euro zone and its impact on the single currency. Regular monthend demand for euro/sterling from a European sovereign account was widely anticipated in the market, while a long weekend in the UK and the US was likely to make for illiquid trade.

British consumer confidence fell for the third month in a row in May as people grew more fearful about the economic outlook and health of their own finances, a survey showed on Friday. Traders said the market had shrugged off the survey and the pound continued to be supported by forecasts for higher interest rates in a report by the Organisation for Economic Development and Co-operation earlier in the week.

Exchange Rates:

GBP – EUR: 1.1837 GBP – JPY: 133.18 CAD – USD: 0.9556
GBP – USD: 1.4591 EUR – USD: 1.2430 GBP – ZAR: 11.060
GBP – AED: 5.36 EUR – JPY: 113.38 AUD – USD: 0.8549
GBP – CHF: 1.6837 EUR – AUD: 1.4578 GBP – NZD: 2.1393
GBP – AUD: 1.7192 EUR – NZD: 1.8154 GBP – CAD: 1.5304
JPY – USD: 0.0110

The rates above are for indication purposes only. Price can vary dramatically based on amount and delivery date.

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Key Sources: Currencies 4 You, Bloomberg, Reuters, Daily FX