UK Pound Mixed in Forex Trading

Earlier today, the UK pound was falling in Forex trading. A drop by the FTSE 100, as well as concerns about bank capitalization, were among the factors causing losses for the sterling. Now, though, things have turned around a bit — at least against some currencies. Concerns about the eurozone had been weighing on the sterling against the US dollar, but new prospects for stability in the euro region are helping the situation.

The Bank of England has moved a little closer to another round of quantitative easing, which would help boost the British economy. Additionally, Monetary Policy Committee members are considering that a little more flexibility might be needed in bank capital requirements. This would help ensure that needed liquidity remains in the economy, and provides some support.

Even though the UK pound was lower against most major currencies earlier, now sterling is higher against some of them, offering mixed results. At 13:41 GMT, GBP/USD is at 1.5641, a gain over the open of 1.5632, and an improvement over the session low of 1.5606. EUR/GBP is an exception, with the euro gaining at 0.8702, up from 0.8690, and GBP/CAD is at 1.5994, up from 1.5939.

Pound Rises Amid European Crisis and Run from Risk Markets

The British pound grew strong amid the European debt crisis and the downfall of the stock markets and commodities, falling against only two out of sixteen most-traded currencies today.
The pound has reached the highest level against the euro in almost two weeks today and also rose from for a second day against the US dollar. The British currency also recovered from the all-time low versus the Japanese yen. The GBP declined against the Norwegian krone and the Swedish krona today.
The pound continues to benefit from the financial uncertainty raging through the Eurozone. It’s currently providing the highest interest rates among the safest currencies and still can boast a high level of liquidity unlike the Scandinavian currencies. At the same time, pound is safely away from the Greek defaults and the Italian downgrades.
The high inflation in the United Kingdom guarantees the comparably high yields on the government bonds. The attractiveness of the pound grows even more as the global investors are seeking an alternative to euro as the alternative to the US dollar (which may sound confusing, but is completely reasonable if you mind the foreign exchange reserves diversification).
GBP/USD rose from 1.5473 to 1.5534 as of 19:14 GMT today. EUR/GBP fell from 0.8725 to 0.8680, while the GBP/JPY currency pair is now trading at 118.79 after closing at 117.03 yesterday.

Hope for new approach in euro crisis buoys markets

Hopes that European leaders will consider new ways to fight the debt crisis, including a contained Greek default, reassured investors on Monday, though analysts said more specifics will have to emerge before a rally gains traction.
Over the weekend, European officials said Germany and other rich EU countries are pushing for a new strategy to the debt crisis, which is threatening to take down the eurozone's larger economies.
One proposal on the table is to ask banks and other private institutions that hold Greek bonds to take a far bigger loss on those holdings, slashing Athens' debt. Many observers have said Greece will not manage to pay down its debt even after taking into account the reduction agreed in July.
The new strategy could also see the firepower of the continent's euro440 billion ($590 billion) bailout fund multiplied several times.
It's not clear if these proposals will gain support but the fact that they were being considered spurred stock markets in Europe after a week of disastrous losses.
By early afternoon, France's CAC-40 was up 2.2 percent at 2,871, while the DAX in Germany rose 2.3 percent to 5,318. The FTSE index of leading British shares was 0.9 percent higher at 5,113.02.

CAD Slows Decline, Posts Record Weekly Drop vs. USD

The decline of the Canadian dollar slowed today, but the currency still fell most in almost three year over this week, posting the biggest weekly drop since the global recession. Futures for delivery of crude oil, the biggest export of Canada, in November slipped 0.8 percent to $79.85 per barrel in New York, following the previous drop by 3.7 percent. The Standard & Poor’s 500 Index rose 0.6 percent after earlier it gained 1.1 percent. The loonie, as Canada’s currency is often nicknamed, fell 3 percent this year. The currency lost 5.1 this week in the biggest weekly drop since October 2088. One-month implied volatility of USD/CAD reached 15.6 percent, following the jump to 16 percent yesterday, the biggest level since May 2010. USD/CAD closed at 1.0280, little changed from the opening price of 1.0282. EUR/CAD rose from 1.3845 to close at 1.3873. CAD/JPY advanced from 74.07 to 74.42, following the drop to 73.59.

GBP Advances as G-20 Meeting Improves Outlook for Global Economy

Another currency that benefited from the meeting of the Group of Twenty nations chiefs was the Great Britain pound. The sterling reached the record low versus the yen yesterday. The G-20 leaders said their nations are “committed to a strong and coordinated international response to address the renewed challenges facing the global economy”. The Stoxx Europe 600 Index rose 0.6 percent, while the FTSE 100 Index climbed 0.5 percent. The number of the new mortgages approved for home purchase by the banks of British Bankers’ Association rose to 35,226 in August from 33,734 in July, compared to forecasts of 33,200. GBP/USD climbed from 1.5341 to 1.5445 after reaching the daily high of 1.5486, while GBP/JPY climbed from 116.91 to 118.13 as of 17:40 GMT today.

Euro Rebounds as Stocks Rises on Hopes for G-20 Meeting

The euro rebounded from yesterday’s drop to the eight-month low after global stocks advanced as the leaders of the Group of Twenty nations meet in Washington.
Investors hope the G-20 policy makers will discuss the global economic imbalances and find a way to help the Eurozone in dealing with its debt crisis. The Standard & Poor’s 500 Index rebounded 0.6 percent, following the drop by 0.7 percent. The index is still down 6.6 percent over this week.
EUR/USD rose from 1.3463 to 1.3498 and EUR/JPY advanced from 102.62 to 103.14 today as of 16:38 GMT.

US Dollar Rises Further as Traders Shun Risk

The US dollar continued its upward movement today as yesterday’s statement of the Federal Reserve continues to force Forex traders to shun risk and to seek safety. The yen outperformed the dollar as a safe currency.
The yesterday’s announcement of the Fed put the Forex market in the risk aversion mode and it’s still in place, bolstered by the signs of a slower economic growth in China. The greenback benefits from this situation as a refuge currency. The Dollar Index, tracking the US currency versus the currencies of six nation’s major trading partners, rose 1.4 percent to 78.447 after it touched 78.798, the highest level since February 14. According to the JPMorgan Chase & Co. index, the implied volatility for currencies of the Group of Seven nations climbed to 15.64, the highest level since May 2010.
Commodities, stocks and growth-related currencies, on the other hand, declined as traders ran away from risk. The Standard & Poor’s 500 Index dropped 3.2 percent, declining for the fourth session. The Standard & Poor’s GSCI Index erased gains of this year, tumbling 4.9 percent.
EUR/USD slumped from 1.3571 to 1.3471 today as of 22:22 GMT after touching 1.3382, the lowest level since January. GBP/USD dropped from 1.5498 to 1.5359 and reached earlier 1.5326, the lowest level in a year. USD/JPY fell from 76.44 to 76.26, while it jumped as high as 76.97 intraday.

CAD Falls Below Parity with USD After Fed Statement

Yesterday’s monetary policy statement of the Federal Reserve had a very negative effect on the Canadian dollar. The growth-linked currency posted the biggest decline since May 2010 today, dropping below parity with the US dollar for the first time since January 2011.
The Fed announced yesterday that it’s replacing its short-term debt with longer-maturity securities. The US central bank mentioned about “significant downside risks” to the US economic growth. Commodities and stocks plunged after the announcement and the loonie, being the ”commodity” currency, followed them in decline. The Canadian currency is often called “the loonie” for the image of the aquatic bird on the C$1 coin.
The Standard & Poor’s 500 Index dropped 3.3 percent. Futures for delivery of crude oil in November slumped as much as 6.7 percent to $80.13 per barrel in New York. The Thomson Reuters/Jefferies CRB Index of commodities slid 4.4 percent.
USD/CAD surged from 1.0081 to 1.0276 today as of 20:53 GMT and reached earlier 1.0360, the highest price since October 2010. EUR/CAD climbed from 1.3679 to 1.3834, following the advance to the intraday high of 1.3930, the highest since September 7. CAD/JPY tumbled from 75.79 to 74.08, while earlier it reached the lowest level since February 2009 — 73.56.

Aussie Below Parity with Greenback

The Australian dollar dropped below the parity level with its US counterpart as signs of slower manufacturing in China and falling stocks weakened demand for Australia’s currency. The HSBC preliminary manufacturing Purchasing Managers’ Index dropped to 49.4 in September from 49.9 in August. That’s the lowest level in two months. The MSCI Asia Pacific Index of stocks dropped as much as 4.1 percent, while the Stoxx Europe 600 Index lost 4.2 percent. AUD/USD dropped from 1.0043 to 0.9774 as of 15:50 GMT today after reaching the daily low of 0.9735.

NZ Dollar Drops as Economic Growth Stalls

The New Zealand dollar slumped today after the report showed that the nation’s economic growth almost stalled in the second quarter of this year.
New Zealand’s gross domestic product rose 0.1 percent in the second quarter of 2011. That’s compared to the median forecast of 0.5 percent and the 0.9 percent growth in the first quarter.
Reserve Bank of New Zealand Governor Alan Bollard signaled the central bank doesn’t feel need to raise the interest rates soon:

We do have a picture where we still do expect to have to push rates up. However, we don’t think there is any particular rush to do that.

NZD/USD dropped from 0.8011 to 0.7791 and NZD/JPY tumbled from 61.22 to 59.55 today as of 16:46 GMT.

Dollar Jumps as Fed Expands Bond Purchases

The US dollar jumped after the Federal Reserve announced it’s going to increase purchases of longer-term securities. The resulting surge of demand for safer currencies was beneficial for the dollar. The Federal Open Market Committee left the federal funds rate at 0 to 0.25 percent range. The FOMC wrote in its statement:

The Committee intends to purchase, by the end of June 2012, $400 billion of Treasury securities with remaining maturities of 6 years to 30 years and to sell an equal amount of Treasury securities with remaining maturities of 3 years or less. This program should put downward pressure on longer-term interest rates and help make broader financial conditions more accommodative.

The expansion of the long-term securities buying program and the prospect for the low interest rates over prolonged time suggests that the Fed has a very negative outlook for the US economy. The dollar, being a ”refuge” currency profited from the risk aversion that followed the FOMC statement. The Dollar Index gained 1 percent to 77.803 as of 17:00 in New York. EUR/USD fell from 1.3571 to 1.3552 as of 4:31 GMT today. GBP/USD dropped from 1.5498 to 1.5460, while USD/JPY rose from 76.44 to 76.75.

RBA Minutes Don’t Speak About Rates Cut, AUD Rises

The Australian dollar strengthened as the minutes of the central bank’s policy meeting showed that the policy makers are content with the current level of the interest rates, reducing probability of a borrowing costs cut. The Reserve Bank of Australia was less dovish than market participants expected, returning appeal of the Australian currency to carry traders, who profit for the relatively high interest rates in Australia compared to the rates in the developed nations. The RBA was moderately optimistic about the country’s economic growth:

Overall, the near-term growth outlook looked somewhat weaker than had been expected earlier, but the medium-term outlook still appeared positive, providing that the world economic outlook did not continue to deteriorate.

The minutes said the central bank’s “members considered that the current setting of monetary policy left the Board well placed to respond to evolving global and domestic economic conditions”. The MSCI World Index of equities gained 1 percent, while the MSCI Asia Pacific Index of shares advanced 0.2 percent. The Aussie, as the Australian currency is often nicknamed, gained on the previous trading session, but weakened somewhat at the start of today’s session. AUD/USD traded at about 1.0261 today as of 2:18 GMT, following the advance from 1.0220 to 1.0274 on the previous trading session. EUR/AUD traded near 1.3364 after it fell yesterday from 1.3386 to 1.3329. AUD/JPY traded at 78.33 after climbing from 78.27 to 78.54 yesterday.

IMF Lowers Growth Forecast for Canada

The Canadian dollar weakened as the International Monetary Fund cut its growth forecast for Canada, making the growth-related nation’s currency less attractive for investors.
The IMF revised its growth estimate to 2.1 percent from the June forecast of 2.9 percent.
The outlook worsened because of the slower global economic growth and the faltering economic recovery of Canada’s major trading partner — the United States of America.
The downgrade of Italy’s credit rating by Standard and Poor’s also had its negative impact.
 Bank of Canada Governor Mark Carney was also concerned about the economy of the US, as he admitted in his speech:

The United States is in the midst of the weakest recovery since the Great Depression, and the bank does not expect that to change at any time soon.

He also spoke about the possibility of higher interest rates:

Given current material headwinds, the policy rate can return to its long-run level after inflation is projected to reach the 2 percent target and output is projected to reach its potential.

USD/CAD traded at 0.9925 today as of 00:19 GMT after rising yesterday from 0.9904 to 0.9924. EUR/CAD traded near 1.3610, following yesterday’s advance from 1.3556 to 1.3595. CAD/JPY traded at about 76.94 after it fell on the previous trading session from 77.26 to 76.97.

Ringgit Falls as Europe Damages Growth Prospects for Asia

The Malaysian ringgit fell today as concerns about the troubles in Europe hurt the outlook for the economic growth in Asia and reduced appeal of the emerging market currencies. The yesterday’s cut of Italy’s credit rating by Standard and Poor’s spurred risk aversion on markets, reducing demand for assets of emerging economies. The Bloomberg-JPMorgan Asia Dollar Index dropped to the lowest level in six months. The Asian Development Bank cut this year’s growth forecast for Asia (with the exception of Japan) to 7.5 percent from the April forecast of 7.8 percent. USD/MYR advanced from 3.1175 to 3.1195 as of 16:23 GMT today, following the rise to 3.1435.

European Problems Have Negative Impact on Canada’s Currency

The Canadian dollar weakened today as the sovereign-debt crisis in Europe saps demand for riskier assets and drive commodity prices down, making the Canadian currency less attractive to Forex trading. The currency advanced against the euro. Crude oil, key export of Canada, fell as much as 2.3 percent to $85.92 per barrel in New York. December futures for copper delivery slid 3.8 percent to $3.7825 per pound on COMEX. The Standard & Poor’s 500 Index dropped 1 percent, while Canada’s benchmark S&P/TSX Composite Index went down 0.8 percent. Earlier market analysts speculated that the loonie behave like a safe refuge from the European crisis. As it turned out, the Canadian currency is still considered “commodity currency” and suffers from problems in Europe and other parts of the world. Yet Canada’s dollar outperformed the shared European currency. USD/CAD rose from 0.9904 to 0.993 as of 5:38 GMT today. EUR/CAD fell from 1.3556 to 1.3526, following the drop to 1.3500. CAD/JPY slipped from 77.26 to 77.00.

Swissie Weakens on Speculation About SNB Intervention

The Swiss franc fell against all but one of most-traded currencies today as Forex traders speculated the Swiss National Bank may adjust the set trading range for the franc in order to support the nation’s exporters. The SNB imposed the ceiling of 1.20 francs per euro on September 6 to support the exporters and protect the nation’s economy from the excessive currency’s strength. The central bank said “it is prepared to buy foreign currency in unlimited quantities”. The bank’s spokesmen Walter Meier decline to comment when asked by reporters about the possibility of changing the trading band for the frank. USD/CHF rose from 0.8818 to 0.8888 and EUR/CHF climbed from 1.2070 to 1.2141 as of 14:13 GMT today

EU Ministers’ Meeting Ends Without Result, Euro Slumps

The finance ministers of the European Union countries discussed the European debt problems, particularly the situation in Greece on the weekend, but the meeting ended without any noticeable result. The euro reacted very negatively to the indecisiveness of the European politicians. Greece should convince the EU leaders and the International Monetary Fund that the nation is eligible for the next round of the bailout. So far, it seems, Greece had little success. Sweden’s Finance Minister Anders Borg stated Greece hasn’t done enough to meet its budget targets. Germany’s Finance Minister Wolfgang Schaeuble, together with Bundesbank President Jens Weidmann, rejected the proposition to use the European Central Bank to boost the EU bailout fund. Schaeuble said:

We don’t think that real economic and social problems can be solved by means of monetary policy. That has never been the European model and it won’t be.

Standard & Poor’s lowered Italy’s credit rating from A+ to A. The agency said in the statement:

Italy’s economic growth prospects are weakening and we expect that Italy’s fragile governing coalition and policy differences within parliament will continue to limit the government’s ability to respond decisively to domestic and external macroeconomic challenges.

EUR/USD dropped from 1.3686 to 1.3608 as of 5:01 GMT today. EUR/JPY fell from 104.82 to 104.12.

GBP Falls for Fourth Week, Quantitative Easing Expected

The Great Britain pound posted the fourth straight weekly decline against the US dollar and the Japanese yen as the fundamental data signaled that the nation’s economy is stagnating, prompting the speculation the UK central bank will be required to embark on a quantitative easing. There was enough data this week to support the negative outlook for the future of Britain’s economy. The RICS UK Housing Market Survey showed 23 percent more surveyors recorded falling rather than rising prices in August, while the house price index of the Department for Communities and Local Government dropped 1.5 percent in July. The retail sales shrank 0.2 percent in August, according to the government report. The economy continues to feel the inflationary pressure as the inflation increased to 4.5 percent in August from 4.4 percent in the month before. Chancellor of the Exchequer George Osborne and Deputy Prime Minister Nick Clegg spoke about the possibility of increasing the monetary stimulus to support Britain’s economy. Bank of England policy maker Adam Posen said the central bank should purchase as much as £100 billion in securities over the next three months. Analysts think that the BoE may expand their asset purchase program, the policy known as a quantitative easing, as early as November. Currently the program worth £200 billion. GBP/USD fell from 1.5831 to 1.5786 during this week. GBP/JPY slipped from 122.62 to 121.19 and EUR/GBP rose from 0.8579 to 0.8740 over the week

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The New Zealand dollar jumped today after the Reserve Bank of New Zealand maintained its interest rates yesterday and signaled that the good health of the nation’s economy can lead to higher rates in the future. The RBNZ held the Official Cash Rate (OCR) unchanged at 2.5 percent yesterday. The central bank explained that “the New Zealand economy has performed relatively well”. Yet the outlook for the global economy, including the markets of the main nation’s trading partners, “has deteriorated markedly”. The RBNZ voiced concern about the strength of the nation’s currency:

Largely because the New Zealand economy has been doing better than many others, the New Zealand dollar has appreciated since the June Statement. The high level of the New Zealand dollar is having a dampening influence on some parts of the tradable sector and on imported inflation.

The bank predicted that the inflation will stay above the bank’s target range of 1 to 3 percent, but over time the growth of the consumer prices will slow. In the end, the RBNZ signaled that higher interest rates are possible in the future:

If recent global developments have only a mild impact on the New Zealand economy, it is likely that the OCR will need to increase.

NZD/USD climbed from 0.8235 to 0.8307 as of 18:16 GMT today. EUR/NZD fell from 1.6833 to 1.6578, while NZD/JPY jumped from 63.13 to 63.85