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(Please note these rates were taken at 11:30am GMT, rates do fluctuate every 2 – 3 seconds)
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If you need any other exchange rates then please don’t hesitate to contact me.
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The Bank of England’s Monetary Policy Committee (MPC) took the market’s attention away from Greece for a brief moment at midday, as it decided to boost its quantitative easing programme by £50bn to £325bn, as expected. The MPC also left its lending rate unchanged at 0.5%. However, the change in maturity of purchases led to a marked shift in markets and the tone of the statement seemed to suggest that the policy debate had now reached a more finely balanced phase, partly a reflection of the improvement in short-term indicators. Turning to today’s events, Lloyds TSB expect January’s producer prices to show that input prices rose by 1.0% on the month, driven by a pick up in global commodity prices. The market is pencilling a smaller 0.2% rise. Lloyds TSB see further scope for slower input price inflation over coming months due to favourable base effects. And a similar effect should see output prices slow to 3.9% from 4.8% for the headline measure, with core’ output price inflation slowing below 3.0% for the first time since Q1 2010 to 2.5%. This backdrop of weaker price pressures is expected to reflect in softer consumer price inflation over the coming months. However, the pace of global economic activity will determine the path of global commodity prices from here.
Looking in the long-term for GBP/USD, since the decline from 2.1161 in 2007, it has formed an ever tighter range between 1.3503 and 1.7043. Since the last test of the top if this range in April last year (1.6747), there has been a modest decline, but the overall range would suggest an eventual return towards the 1.4000 – 1.4500 area. There is more immediate resistance around 1.5926 (on a month end basis) before a more serious test of 1.5489 support emerges. Technically, In the short-term, the 1.52 – 1.61 ranges since September has been marked by trend exhaustion patterns. It now looks likely that a further signal may complete within the next few days or so. If this occurs within the 1.6096 – 1.6169 resistance area, it increases the chance that the market will begin to retest the lower part of this range.
Looking in the long-term for EUR/GBP, the bull trend from the 0.5686 low in 2000 remains intact. It has several times tested trend support line, but each quarter has closed above and the trend has continued. It is currently testing that support line again at 0.8170, but so long as it holds then the direction of the trend should eventually lead to a retest of parity. In the short-term, the decline from 0.9083 in July last year remains intact, despite the minor rally from the 0.8222 low in January. Trend exhaustion patterns still indicate that a retest of these lows is required, specifically to 0.8265 or 0.8244. From there a resumption of the long-term bull trend is more likely to commence.
The ECB kept the refinancing rate unchanged at 1% as expected by most analysts. At the press conference, Draghi highlighted that “survey indicators confirm some tentative signs of a stabilisation in economic activity”. This signals that the ECB’s concerns regarding the growth outlook have diminished somewhat since the last meeting. Draghi stated that the inflation outlook remains broadly balanced. Inflation is expected to stay above target in the coming months before falling below 2%. So, the inflation outlook is in line with the ECB target. Danske continue to expect the ECB to keep its leading interest rate unchanged at 1% until 2014. Draghi stated that a change in the leading rate had not been discussed. In Danske’s view, the likelihood of a rate cut has diminished further and the possibility of a rate increase earlier than 2014 has increased slightly.
Although negotiating through the night, Greek politicians did not reach an agreement on the required austerity measures. As they have now failed to meet about five deadlines, the Greeks will have to adhere to a very tight schedule if Greece is to avert a sovereign default on 20 March, when about EUR14.4bn worth of debt matures. However, Greek politicians are very close to the goal. The stumbling block was pension cuts worth EUR300m out of a total austerity package worth EUR3bn. Danske expect a solution to be found. There is a lot at stake and negotiators just need to put the last bits and pieces of the agreement together. Greece will be allowed another 15 days to find the EUR300m outstanding, the latest reports say, though other sources say they will only have until Sunday. This could pave the way for a conditional agreement.
The US trade deficit is expected to have widened in December. A pick up in imports growth is expected to see the trade balance deteriorate to -$49.0bn from -$47.8bn, as the improvement in the labour market continues to underpin a recovery in consumer spending.
Overnight the Aussie dollar has declined as the RBA lowered its growth estimate to 3.5% from 4.0% in the previous quarterly monetary policy assessment, taking away some of the support after the surprise decision earlier this week to keep rates unchanged at 4.25%.
The contents of this report are for information purposes only. It is not intended as a recommendation to trade or a solicitation for funds. The author(s) cannot be held responsible for any loss or damages arising from any action taken following consideration of this information.
