Daily Currency Insight from Halo Fnancial

(Clare Allen) #1

There really is only one major news story; Ireland has agreed to an €85 billion package of loans for its high street banks from the European Union and International Monetary Fund. No one was surprised by the announcement, no one thought Ireland would continue to resist the pressure to act and no one was enticed into the markets to buy or sell the Euro. Traders and investors remain nervous; Ireland may have made its essential medium term arrangements but where is the threat coming from next? Is it Spain, Portugal, Belgium, another round of trouble for Greece? Who knows but the fact is that the Irish story is certainly not the end of the problems for the Eurozone. The European Central Bank makes its interest rate decision on Thursday and we will be very interested in the press conference that follows because traders will have had a few days to consider this Irish plan by then and the questioning will be well informed. The announcement that Germany could be in financial difficulties if it has to keep bailing lesser EU nations out des add a bit of urgency to the debate.

In the meantime, the Euro has been sold slightly and the US Dollar has been bought as a safe haven while the EU and Korean stories rumble on. US traders will return today from a four day break and we await their verdict on the Euro debacle. The fact that the US Dollar is at its strongest against the Euro in 2 months may cause a flow of funds from the Euro into US Treasuries and that would exacerbate the problems of US Dollars strength as far as US exporters are concerned. Friday’s employment report is the highlight of the week as far as data goes but the EU story could well overshadow that announcement in terms of influence on the value of the US Dollar.

Sterling is in a very mixed pattern with strength against a beleaguered Euro but weakness against the US Dollar and largely unchanged ranges against the Australian, New Zealand and Canadian Dollars. We get consumer confidence and UK money supply data this week so the Pound could be a tad more volatile and we also get the change of month over the next couple of days so that will be interesting as traders settle this books ahead of the month end.

For its part, the Canadian Dollar is likely to be pretty volatile tomorrow as the quarter 3 economic growth data is announced. Another slowdown is forecast and that could give Canadian Dollar buyers the opportunity they need to buy some at better levels. However, the Sterling - Canadian Dollar exchange rate is still capped around C$1.64 so it will take a hefty push to move us above that level.

The Aussie Dollar is also a tad weaker after the Reserve Bank of Australia telegraphed its expectation of flat interest rates in the months ahead and ahead of Wednesday’s release of the Aussie economic growth data for Q3. The forecast is for slowdown in growth as higher interest rates start to bite on the domestic economy and as a slower pace of Chinese growth restricts exports. If the figure is as forecast, it will cast doubt on the RBA’s decision to hike interest rates at its last meeting.

So as we contemplate further fallout over the Euro area problems, a different kind of falling out may well occur after a quarter of a million sensitive US communications are set to be published by WikiLeaks. I can’t imagine that anyone will be surprised that some diplomats are less than diplomatic in their private emails and messages but it will be interesting to see what they really think of the rest of us. Of course America already knows what most of the world thinks of it; the US government only has to sneeze and someone somewhere will burn a star spangled banner in front of a TV crew.

And finally, I was forced to watch the X factor last week (“It’s really good; you’ll love it” my daughter promised) but I was overwhelmed by the unadulterated ordinariness of the karaoke acts on the show. However, Wagner was anything but ordinary and you could use the term, ‘extraordinary’ in its most insulting context here. I read this morning that not only had he been evicted or whatever they do on that program but he is also being investigated for cannabis use during the show. While you are at it constables, you may want to dope test all those who voted for him in the last few weeks.