Daily Currency Insight from Halo Financial

(Clare Allen) #1

The G20 leaders are apparently at loggerheads over the best way forward for global recovery. A lot of criticism is flying in America’s direction over their monetary expansion because smaller nations are fearful of the effects of the flood of cheap money swishing around the globe for short term investment reasons.

The Euro is losing a little ground as traders and investors worry about the various central banks’ ability to raise funds themselves rather than having to revert to the European Central Bank for financial support. Irish bond prices fell after an EU commissioner said that Ireland could not remain a low tax area. That would seriously damage Ireland’s ability to attract overseas inward investment. This morning sees a € 1.25 billion bond sale in Portugal which will be watched closely to see if investors are still confident that the Eurozone is over the worst of it.

Sterling’s focus today is the Bank of England’s quarterly inflation report. The lack of a press conference after last week’s ‘on hold’ decision means no one knows what the BOE is thinking yet but they will lay out their forecasts and vision of the future of the UK economy within this report; hence it will be read from cover to cover. Those who will read it aren’t quite as obsessive as the gamers who queued outside shops for 32 hours waiting for the latest ‘gore and guns’ game but they are very nearly as determined to come up with an assessment before anyone else. Today is a good day for these guys and should be a volatile one for the rest of us. Meanwhile the international monetary Fund says that Britain’s economy is on the mend but the IMF also warned that further threats exist from the ongoing European Debt concerns. However, yesterday’s release of better than expected trade gap figures and positive manufacturing data helped to add some validity to the IMF’s assertions.

Overnight market movers included the Australian and New Zealand Dollars. The Australian Dollar hit parity with the US Dollar. That has been a long time coming and many forecasters have waited over a year before seeing their target of 1:1 between the US Dollar and Aussie dollar hit. However, as is often the case, as soon as it hit that level, the profit takers caused it to fall away. The variation in the Sterling - Australian Dollar rate was far less exciting however, but Sterling did slip lower against the Aussie Dollar overall.

The New Zealand Dollar is overvalued according to the Governor of the Reserve Bank of New Zealand. Alan Bollard also said the strength of the Kiwi Dollar was being driven by the influence of the US stimulus package but the Kiwi Dollar has been strengthening for the past two years, so that is a little hollow. There is no doubt though that at levels not seen for 25 years or more, the New Zealand Dollar is significantly overbought and we may well see a correction in the months ahead.

Aside from the BOE report, today’s other big data comes from America where the trade balance and import/export prices will be announced of October and this evening brings a speech from the head of the |European Central Bank on “how to overcome the crisis”. Let’s hope he has all the answers because this has gone on long enough now; I think you’ll agree.

And finally, it is a good thing that so many crooks are thick. In Sugarloaf Key, Florida, the Sherriff’s Department were called to the scene of a burglary and set about looking for clues to the identity of the burglar. It didn’t take long; the thief had taken the opportunity to log onto his MySpace account and left the computer logged in when he left. An 18 year old was later arrested.

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