We wonder if confidence in the UK government is coming back

Foreign Exchange - Currency Outlook

The US Dollar Exchange Rates made a solid gain yesterday against the euro and this spilled over to other currencies as well. The euro rate made an overnight high at 1.2900 but failed to hold it, sinking to 1.2688 by mid-morning in New York. The euro has flopped around since then and risen to just over 1.2800 by 8 am today, but despite choppiness in a wide range, the euro exchange rate is on the defensive now. We need the euro to fall under the twice-hit 1.2680 area to confirm the downtrend. If we get it, the next move would be a test of last Friday’s low at 1.2555. With the ECB expected to cut rates next week, this may seem a no-brainer but nothing is ever a no-brainer in such a nerve-ridden market.

The dollar vs japanese yen is the highest since last November, breaching the round number 98 for a few minutes overnight. Bloomberg says gloom about another lost decade is rising, with fear over tomorrow’s unemployment and CPI data. Some foreign exchange analysts note an area of resistance at 98.90, which is the 50% retracement of the dollar drop from last Aug (110.66) to the Jan low of 87.13. We say it's an obvious target but with conditions in Japan worsening by the minute, why stop there?

A level of 110 can easily be imagined.

Pound Sterling closed lower on the day yesterday, making a big jump down from 1.4663 on Monday to 1.4171 on Wednesday during US hours, but is recovering a bit this morning on what Market News says is demand from a macro hedge fund. We wonder if confidence in the UK government is coming back, too. It just announced a very big and complex rescue plan for RBS that involves everything but the kitchen sink - capital injections, a bad bank, insurance, and on the side, a BoE commitment to quantitative easing, which can entail buying some of RBS’ toxic paper as well as others’.

Pounds to US Dollars = 1.4313
Pounds to Euros = 1.1219
Euro to Pounds = 0.8906
Pounds to Australian Dollars = 2.1901

Bye For Now

Barbara Rockefeller
Foreign Exchange Trading
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