GBP vs EUR = -1.25% GBP vs USD = -1.19%GBP vs AUD = -0.15% GBP vs ZAR = +0.18%GBP vs JPY = -1.93% GBP vs NZD = -0.59%GBP vs CHF = -1.47% GBP vs THB = -1.51%
Rumours send Sterling crashing
Unfortunately yesterday’s trading saw the same story we have seen for the past few weeks – Sterling weakness across the board. Sterling once again neared an all time low against the Euro, as well as losses against almost all of the other major currencies, as the increasing speculation of an April interest cut was further priced into the market. This speculation was fuelled by a closer than expected decision at last month's Bank of England interest rate meeting (where the rate was held), suggesting that the next rate cut could be just a few weeks away.
In fact, trading started as it meant to go on on Wednesday, by 9:39 Sterling had seen a loss of 0.4% against the Greenback. This backs up the old saying that rumours move markets.
The minutes from the last BoE meeting were released yesterday at 09:30 GMT, the same time we learnt that average earnings in the UK were weaker than expected – both coupling together to increase (GBP’s) market movements in a negative manner.
“The minutes confirmed an easing psychology from the MPC……and softer than expected labour market figures reopen the case for a cut in rates as early as April, which is why Sterling has fallen,” said Audrey Childe-Freeman, European economist at CIBC World Markets.
A currency – Sterling in this case – will normally weaken when its interest rate is cut, as investors will move their positions to higher yielding areas. So, even though Sterling is weak already, do not be fooled that this is the end of the slide - multiple interest rate cuts could easily see the drop continue.
HBOS – the new Northern Rock??
The Financial Services Authority is investigating trading in financial stocks after rumours of banking trouble battered shares and led mortgage bank HBOS on Wednesday to a record low.
Market jitters over the past months have been exacerbated since the near-collapse of Northern Rock by persistent rumours of liquidity and funding trouble elsewhere in the UK banking system, hitting other lenders despite repeated denials.
"There has been a series of completely unfounded rumours about UK financial institutions in the London market over the last few days, sometimes accompanied by short-selling," Sally Dewar, the FSA's head of wholesale and institutional markets, said in a statement.
If history repeats itself and HBOS does travel down the same path as Northern Rock, we could see even further Sterling weakness across the board as the government looks to financially ‘help’ them to avoid yet another of the UK’s largest finance houses collapsing.
In Today's News
At 7:00 - German Producer Price Index (MoM & YoY) released by the Statistisches Bundesamt Deutschland measures the average changes in prices in the German primary markets. Changes in the PPI are widely followed as an indicator of commodity inflation. A high reading is seen as positive (or bullish) for the EUR, whereas a low reading is seen as negative (or bearish).
At 9:30 - UK Retail Sales (MoM & YoY) released by the National Statistics measures the total receipts of retail stores. Showing percent changes and reflecting the rate of changes of such sales. Changes in Retail Sales are widely followed as an indicator of consumer spending. A high reading is seen as positive, or bullish for the GBP, while a low reading is seen as negative or bearish.
If all of this negativity appears to be too overwhelming and you would like to talk through your options in such a volatile marketplace, then please contact your dedicated account manager here at Foreign Currency Direct today and talk through your purchasing options.
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