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IFX Market Report

Submitted by qrops on Fri, 08/Jan/2010

Yesterday saw Sterling continue to fall against both the Euro and USD, as continued fears regarding fiscal issues and the future political state of the UK.

This weakness came even though Gordon Brown was backed by fellow Labour ministers to remain in power, after an attempt to out him from leadership by way of secret ballot, failed to perspire.  This failure left the doors open for a possibility of a ‘Hung Parliament’ when the election arises within the next 5 months.  A ‘Hung Parliament, could show instability within the leadership of the UK, and with each party having different views on policies, could show disagreement on future political decisions.

This will not help Sterling and simply adds to the list of negatives, which already include the poor fiscal state in the UK as well as the possibility of the UK’s AAA Sovereign rating being downgraded.  Sterling was down by the afternoon session and traded at a 1 week low of $1.5896 USD, whilst trading slightly lower in the late morning at €1.1079 EUR.

Sterling made some minimal gains to €1.1121 EUR, and $1.6036. These gains were supported by Halifax showing UK house prices rose1% in December, a sixth month consecutive gain. Quantitative easing was left unchanged at a record £200 Billion, and Interest rates remained at 0.5% and are likely to remain without increase until at least February.

Sterling hit a 25 year low €1.7309 against the Aussie Dollar (AUD), as strong retail sales boosted chances of a further Interest rate increase strengthened it.

All eyes in the UK are still fixed on 26th January, which will see the UK release it’s 4th Quarter GDP estimate.  We are expected to see a growth, and any change in this prediction, could way heavily on Sterling.

This morning sees the release of Producer Price Index in the UK.  In the Eurozone data release GDP revised 3rd Quarter figures, Unemployment Rate, and Industrial Production .  In the afternoon session via the USA we will see Average Hourly Earnings, Nonfarm Payrolls and Unemployment Rate.

IFX Market Report

Submitted by qrops on Thu, 07/Jan/2010

Sterling started yesterday pulling back some of the previous day's losses against the US dollar and Euro. This was even after data released showed a deterioration in UK consumer confidence which fell to 69 in December from 74 in November, this is the sharpest fall in over a year as many economists scaled back their expectations for an economic recovery this year.

Despite the poor consumer confidence figures separate data showed UK job placements and wages rose last month.

These gains were somewhat restricted due to the ongoing concerns about the UK economy and the deeply indebted British government also the impending general election which may result in sterling being under pressure in the midterm.

Investors are concerned about sterling's prospects in light of a national election which must be held by mid-year, which is likely to underline the government's weak fiscal position.

In addition, markets are wary of the risk that the vote may result in a hung parliament, which may complicate government efforts to pass measures to stimulate the economy with reaching an agreement on what is the best course of action being difficult to agree.

News was released in the Euro zone as a European Central Bank official said the European Union would not help to bail Greece out from its fiscal problems; this did little to help sterling make any significant ground against the euro.

Many economists believe even though sterling is in a weak position and the outlook for the pound is challenging it would need to take data such as a credit rating downgrade or extension to quantitative easing for sterling to suffer and push it lower. Yet many feel as the UK economy is behind many of the other major countries in pulling out of recession any gains are far in the future.

The BoE will issue a rate decision following its monthly meeting today, but analysts are not expecting a change in interest rates or the central bank's asset purchasing programme.

Sterling hit one-week lows against the dollar and euro this morning, as the pound remained weighed down by political uncertainty as Prime Minister Gordon Brown fought off an attempt within his party to unseat him and replace him before the general election.

This morning at 10.00hrs the pound was at $1.5930, €1.1099, 11.739 ZAR, 147.95 JPY, 1.6451 CHF, 1.6450 CAD and AUD 1.7340

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