Sterling Under Pressure on Dovish Talk From BOE

Sterling is being weighed by some very dovish comments from the Bank of England on Wednesday.

Following the publication of the central bank’s Quarterly Inflation Report on Wednesday, BOE Governor Mervyn King told reporters in London that now would not be appropriate to raise interest rates, but that further asset purchases have not been ruled out.

He added that he stands behind the new government’s initiatives to reduce the deficit quickly, and that the euro zone “clearly” needs some kind of fiscal union.

The comments add to the view that rates could remain lower for a longer period of time, an unexpected development for the FX markets which thought that the central bank could be concerned about recent inflation rates.

Meanwhile, the Quarter Inflation Report said that nation’s downside growth risks have increased somewhat, but that the nation’s budget cuts could need to be more demanding than previously thought.

The report also forecasts CPI growth of 0.6% by the end of 1010, and 1.7% by the end of 2011.

The threat of weaker than expected growth, means that interest rates could remain lower for a longer period than expected, a development which is hurting the currency on Thursday.

The dovish talk was also strong enough for markets to ignore a better than expected jobs report on Thursday.

According to the office for National Statistics, UK jobless claims declined 27.1k in April, faster than calls for a 20.0k pullback and adding to a 32.7k decline in March. The claimant count rate fell to 4.7% despite expectations for no change to the prior 4.8% level.

Although the data are good for the pound sterling, the currency is being weighed upon by the threat of low interest rates for a longer period of time.

GBP/USD last traded lower by 19 pips at 1.4928 after trading between 1.4861 to 1.5045 today. Short term resistance lies at 1.5054, 1.5391 and then 1.5498 and 1.5575, with support at 1.4477, 1.4398 and 1.4111.

Euro Zone to Lend €1210 Billion to Greece

Greece continues to be the main headline in the foreign exchange complex on Monday after European leaders agreed to a €110 billion lending facility for the beleaguered nation over the weekend.

According to Eurogroup President Jean-Claude Juncker delivering the news, €80 billion in loans will come from the euro zone, with the IMF fronting the remaining €30 billion.

The package also includes a €10 billion provision which will go to creating a Greek, bank-stability fund. According to EU Monetary & Economics Commissioner Olli Rehn the interest rate on the Greek lending facility if around 5.0%, and the funds will begin being disseminated on May 19, the next Greek government bond redemption.

The big question here is whether or not the measures will be sufficient to calm the financial markets, and convince traders that Greece will not default on its debt, and that Spain and Portugal will not be dragged down.

While earlier indications suggested that the markets were happy with the news (the euro opened higher at the beginning of the Asia-Pacific session) EUR/USD has since declined as the markets have opened.

One may point out that early reports last week had €120 billion euro allocated to Greece.

Also, German policymakers have suggested the agreement will be a tough sell for the voters, which will vote in regional elections over the coming days.

The bottom line is that if Germany wavers, the single currency will remain weak, or weaken further.

EUR/USD last traded lower by 26 pips at 1.3268 after trading between 1.3262 to 1.3361 so far today. Short term support lies at 1.3225 and then 1.3115 and then 1.2965 from April 28, 2009, while resistance is at 1.3426 followed by 1.3521 and 1.3818.

Euro Zone to Lend €110 Billion to Greece

Greece continues to be the main headline in the foreign exchange complex on Monday after European leaders agreed to a €110 billion lending facility for the beleaguered nation over the weekend.

According to Eurogroup President Jean-Claude Juncker delivering the news, €80 billion in loans will come from the euro zone, with the IMF fronting the remaining €30 billion.

The package also includes a €10 billion provision which will go to creating a Greek, bank-stability fund. According to EU Monetary & Economics Commissioner Olli Rehn the interest rate on the Greek lending facility if around 5.0%, and the funds will begin being disseminated on May 19, the next Greek government bond redemption.

The big question here is whether or not the measures will be sufficient to calm the financial markets, and convince traders that Greece will not default on its debt, and that Spain and Portugal will not be dragged down.

While earlier indications suggested that the markets were happy with the news (the euro opened higher at the beginning of the Asia-Pacific session) EUR/USD has since declined as the markets have opened.

One may point out that early reports last week had €120 billion euro allocated to Greece.

Also, German policymakers have suggested the agreement will be a tough sell for the voters, which will vote in regional elections over the coming days.

The bottom line is that if Germany wavers, the single currency will remain weak, or weaken further.

EUR/USD last traded lower by 26 pips at 1.3268 after trading between 1.3262 to 1.3361 so far today. Short term support lies at 1.3225 and then 1.3115 and then 1.2965 from April 28, 2009, while resistance is at 1.3426 followed by 1.3521 and 1.3818.

Euro Under Pressure As German Support For Greece Not Certain

The euro is under pressure again on Tuesday as a German commitment to coming to the rescue of Greece is not yet certain.

Earlier this morning, German Chancellor Angela Merkel told an audience in Soest, Germany, that the nation will not release funds to Greece until it is presented with a plan to help the beleaguered nation.

The comments come ahead of a state election in Germany on May 6, and voter opposition to the Greek bailout plan is rampant.

Meanwhile, in an interview with Bloomberg News, European Central Bank Vice President Lucas Papademos said that the Greek fiscal package being prepared for May will contain measures to contain the risk that the crisis will spread to the rest of the euro zone.

Also, speaking before an audience in Athens, George Provopoulos of the Greek central bank said that Greece needs to surprise the markets by undertaking deeper than expected budget cuts so as to reinforce its commitment to reducing its debt.

Although the comments have no bearing on FX, the central banker does make an interesting point. If Greece manages to outdo expectations for its debt reduction, it would indeed bring down yields on government bonds, and help support the euro.

Meanwhile, Papademos’ comments should help alleviate some of the tensions on the euro if he proves to be correct. Unfortunately, faith in the European leadership is sparse these days, and until the region presents a solid plan to back Greece, the currency is likely to continue weakening.

As a consequence, risk aversion is high on Tuesday, making for a weaker euro.

EUR/USD last traded down 75 pips at 1.3308 after trading between 1.3299 to 1.3416 so far today. Support lies down at 1.3202, 1.2965 from April 28, 2009, and then 1.2886 from six sessions before that. Meanwhile resistance is at 1.3523, 1.3679 and then 1.3692.

Sterling Under Pressure Despite Upbeat Deficit Data

The pound sterling is under some pressure on Thursday despite a smaller than expected increase in the budget deficit.

Earlier this morning, the Office for National Statistics reported that the UK’s public finances rose to +£25.8 billion in March, short of calls for an increase to +£31.3 billion from the prior month’s revised +£8.0 billion.

The results translate into a £152.8 billion deficit, the largest since World War II.

Public sector net borrowing advanced to +£23.5 billion in March from a revised +£9.7 billion, just short of calls for a +£24.0 billion level.

Simultaneously, the ONS also reported that annual retail sales excluding fuel were in line in March, rising 4.0% compared to the revised 5.0% increase the month prior. Headline sales advanced 2.2%, just short of calls for a 2.3% gain and prior 3.2% increase.

The data failed to have much of an impact on FX, which moved instead on a smaller than expected budget deficit reported simultaneously.

On the news, GBP/USD popped up 29 pips, but continued to head south, last trading lower by 19 pips at 1.5392 after trading in a range between 1.5376 to 1.5473 today.

Short term resistance lies at 1.5507, 1.5524, and the nothing until 1.5575. Support is found at 1.5290, 1.5192, 1.5130 and 1.4799.

The euro’s demise on Thursday appears to be weighing on the currency.

German Media Reports That Greece Will Borrow €90 Billion Over Three Years

The euro continues to be under pressure on Wednesday after more downbeat news on the Greek debt crisis.

Earlier this morning the Handlesblatt news agency cited unnamed sources in the EU as saying that the Greek lending facility could total €90 billion over three years.

Meanwhile, an unnamed German government source said that the final bill could be “twice that much”.

An EU spokesperson vehemently denied the claims, saying the Handlesblatt article is based on “speculation”.

Adding to concerns were comments from the Fitch ratings agency saying that it won’t be long before Greece reaches out for aid from its friends.

In an interview with Bloomberg News, Fitch Ratings Director Christopher Pryce says Greece will likely be forced to activate its emergency lending facility with the EU and IMF within the next two weeks. He also pointed out that Greece needs to raise €11.6 billion by the end of May.

Portugal was also weighing on the euro’s gains on Wednesday after the EU said the nation may not meet 2010 budget goals.

Earlier this morning EU Monetary and Economics Commissioner Olli Rehn told audience in Brussels that Portugal will likely need to adopt additional measures in 2010 to meet its budget obligations, and that the economic forecasts which the nation had incorporated were too optimistic.

Rehn also said that financial aid needs to become “unattractive”, but declined to comment on how this could be done.

Both comments are weighing on the euro, which should be gaining on the back of declining risk aversion on the USD.

EUR/USD last traded lower by 3 pips at 1.3610 after trading between 1.3600 to 1.3665 so far today. Short term support lies at 1.3283, 1.3268 and then 1.3247 from May 6, 2009, followed by 1.3213 from two days before that, while resistance is at 1.3692, 1.3818 from March 17 followed by 1.3839 from February 9.

Euro Bounces on Details of Greek Lending Facility

The euro is finding some support on Monday after European leaders reached an agreement over the size of the Greek emergency lending facility.

Eurogroup President Jean-Claude Juncker told reporters in Brussels on Sunday that euro zone finance ministers have agreed to provide Greece with up to €30 billion this year in bilateral standby loans if necessary, adding that the loans contain “no element of subsidy”.

Meanwhile, EU Economic Commissioner Olli Rehn said that the Greek loans would be fixed according to an IMF formula and would be at a rate of approximately 5%. He added that the program will be activated “when needed”, and that the loans will be covered by the EU and IMF at a 2:1 ratio.

Reacting to the news on Monday, ECB President Jean-Claude Trichet said that decisions being reached over the Greek emergency lending facility are “positive”, and that he expects all parties involved to keep up their responsibilities, including Greece, on reducing its budget deficit.

Meanwhile, EU spokesperson Amadeu Altafaj affirmed that the interest rates set on a lending facility for Greece will be set independently by the EU and IMF, and may differ between both organizations. Nevertheless, the decision to active the lending facility will have to be made by the Eurogroup acting unanimously.

The comments continue to add credence to some of the gains in the euro seen this morning, however they are not surprising given the need for an appearance of confidence in this situation.

The key here could be the 5.0% interest rate being discussed, since up until recently, the markets were offering a rate of around 7.0% on Greece bonds. This could be viewed as a subsidy by some euro zone nation, a move which would constitute a violation of EU law.

Nevertheless, EUR/USD last traded higher by 85 pips at 1.3585 after trading in a range of 1.3492 to 1.3692 so far today.

Short term support lies at 1.3283, 1.3268 and then 1.3247 from May 6, 2009, followed by 1.3213 from two days before that, while resistance is at 1.3818 from March 17 followed by 1.3839 from February 9.

Euro Moves Higher After Strong Economic Data

The euro is making some head way on the back declining risk aversion, bolstered by an upbeat employment report out of Germany, and strong euro zone CPI.

According to local authorities, German unemployment declined by 31k jobs in March, against expectations for a 7k increase and the deeper than the prior month’s 1k shortfall. The unemployment rate fell to 8.0% despite calls for no change to the unrevised 8.2% level, and the revised 8.1% rate from February.

Adding to the euro’s gains on Wednesday was a stronger than expected inflation report out of the euro zone earlier this morning.

According to Eurostat, the euro zone CPI estimate suggested a 1.5% annual inflation rate for March compared to calls for a 1.1% level and the prior month’s 0.9% rate.

The results increase the probability of an interest rate hike from the European Central Bank, a development which is positive for the European currency.

Also adding to the euro’s gains were comments from European Central Bank President Jean-Claude Trichet telling reporters in Stockholm that he expects Greek bond yields to decline, as market participants take into account the country’s debt reduction efforts. He added that he welcomes the expertise of the IMF in helping Greece tackle its budget problems.

The comments are good for the euro, in that if Trichet is right, the currency stands to regain some of its losses as bond yields increase in the euro zone, making investments in the region more attractive. Stay tuned.

EUR/USD last traded higher by 72 pips at 1.3485 after trading between 1.3385 to 1.3489 so far today. Short term support lies at 1.3268 and then 1.3247 from May 6, 2009, followed by 1.3213 from two days before that, while resistance is at 1.3569 followed by 1.3818.

Euro Claws Back Losses After ECB Agrees to Accept Greek Bonds

The euro is clawing back the day’s losses ahead of a critical European Union Summit in Brussels on Thursday, and is now in positive territory against the USD after the ECB offered an olive-branch to Greece.

Earlier this morning, ECB President Jean-Claude Trichet announced that the central bank will make loans against collateral graded as low as BBB-, but that the amount of loans obtained will be less that the higher AAA graded paper.

He added that interest rates remain “appropriate”.

Meanwhile, ahead of the EU summit in Brussels, German officials continued to reaffirm that aid to Greece must only come once the country fails to raise capital from the private sector.

Earlier this morning, EU Monetary and Economics Commissioner Olli Rehn told parliament that the EU Summit comes at a critical time for the euro zone, and that the monetary union must be defended. Regardless, all eyes and ears will be on the EU Summit, where a formal stance on the issue could be decided.

Speaking to reporters ahead of the start of the meetings Prime Minister George Papandreou is seeking support from the euro zone nations, so that the nation can raise the necessary capital to tackle its budget problems.

Also speaking at a press conference in Amsterdam earlier this morning, the central banker said a package led by the International Monetary Fund, and backed by member euro zone nations would be idea.

The comments go against the stance of European Central Bank Vice-President Jean-Claude Trichet, who has been pushing for a purely European solution, so as not to damage the credibility of the European Monetary Union.

In the overnight, and ahead of the EU summit in Brussels on Thursday, the euro declined to $1.3284USD, its worst level versus the greenback since May 7, 2009.

Nevertheless, with the ECB move resulting in Greek government bonds becoming less unattractive to investors, the euro has managed to recover, with EUR/USD last trader higher by 51 pips at 1.3366 after trading between 1.3284 and 1.3371 so far today.

Short term support lies at 1.3247 from May 6, 2009, and then 1.3213 from two days before that, while resistance is at 1.3569 followed by 1.3818.

Going forward, talk from the summit, is likely to be a hot topic for euro trader over the next several days. If the euro zone doesn’t come to the aid of Greece, expect the currency to decline further.

Euro Under Pressure As EU Summit Looms

The euro is under additional pressure on Monday with focus lying on the upcoming EU summit this week, where the fate of a European-led aid facility to Greece remains increasingly uncertain.

According to Deutchlandfunk over the weekend, German Chancellor Angela Merkel said she has made no decision on whether to support EU aid or to back an IMF solution for Greece.

The Chancellor warned of raising “false expectations” for a Greek solution at the March 25-26 EU Summit, pointing out that the issue isn’t on the agenda.

Reacting to the comments this morning, European Commission remains hopeful that an aid facility for Greece can be set up despite German opposition.

According to a statement released by the office of President Jose Manuel Barroso this morning, the President is “not disappointed” by comments made by German Chancellor Angela Merkel seeming to back away from aid to Greece over the weekend. Instead, the President says he remains hopeful that a solution can be agreed to in the coming days.

The EU summit is seen by traders as the key event where the fate of Greece will be decided. If an agreement to set up a facility is struck, expect the euro to regain some of its recent losses. On the other hand, failure for policymakers to reach an agreement could weaken the euro further.

The USD is broadly stronger on the back of the rising risk aversion, with Euro/USD down 0.16 cents to 1.3514, USD/CAD up 0.29 cents to 1.0202, USD/Yen up 0.04 points to 90.58, GBP/USD down 0.27 cents to 1.4986, and AUD/USD down 0.43 cents to 0.9111.

EUR/USD has traded in a range of 1.3498 to 1.3547 so far today. Short term support lies at 1.3500 and 1.3442. Resistance comes in at 1.3547 and 1.3586.

Euro Moves Higher As Finance Ministers Agree to Emergency Lending Facility

The euro has moved higher on Tuesday on the back of the completion of a broad framework for an emergency lending facility to euro zone nations facing budget problems.

In a statement released this morning, euro zone finance ministers were said to have reached an agreement over the “the technical modalities enabling a decision on coordinated action and which could be activated swiftly in the case of need … The objective would not be to provide financing at average Euro-zone interest rates, but to safeguard financial stability in the EUR area as a whole.”

After the meeting, Spanish Finance Minister Elena Salgado said that the time for nations to prepare their exit strategies is now, and that ministers had also agreed to budget guidelines for 2011. She made no mention of Spain’s potential difficulty I tackling its budget problems. All in all, the comments are neutral for FX.

According to Monetary and Economics Commissioner Olli Rehn, the EU’s economic recovery remains fragile, but should be self sustained by 2011.

Meanwhile, currency markets broadly ignored the days’ economic data. The German ZEW economic optimism index fell to 44.5 in March, better than calls for a decline to 43.5 from 45.1 the month prior. The current conditions index rose to -51.9, just further than calls for an increase to -52.0 from -54.9 the month prior.

Although technically a small positive for the currency, EUR/USD only experienced a modest pop.

Also, euro zone CPI rose 0.3% month-over-month in February, in line with calls and partially offsetting a 0.8% decline the month prior. Annual production was up 0.9%m in line with forecasts and priors.

Although the data were in line, they are also a confirmation of the CPI picture in the euro zone, with preliminary estimates already having been released.

On a side note, core CPI fell to a 0.8% annual growth rate compared to the prior 0.9% gain, its slowest pace on record.

Although the ECB cares more about headline CPI than core CPI, it suggests that rates in the EU could remain unchanged for some time, a development which would weigh on the currency.

The combined news has helped the euro sustain a modest rally against the USD, with EUR/USD higher by 49 pips at 1.3727. The pair has traded in a range of 1.3657 to 1.3704 so far today. Short term support lies at 1.3537 and 1.3531, with resistance at 1.3839 and then 1.4026.

Sterling Under Pressure On Warnings of Negative Quarter

Sterling is under sharp pressure on Monday after a BOE Board member warned of a possible slide in GDP.

In an interview with Western Morning News over the weekend, Bank of England Monetary Policy Board Member, Kate Barker said UK economic growth may contract once more, but will likely not fall back into recession. She explained that bad weather and an increase in the VAT are likely to hurt some of the increases in retail sales in the UK.

The comments were sour enough to overshadow some upbeat talk from a Moody’s analyst earlier this morning. In an interview with Reuters, Moody’s senior VP Kristin Lindow said that a hung parliament in the UK would likely take debt reduction measures, leaving the UK’s AAA rating intact, and that the UK remains a long way off from a change in outlook.

Indeed, much of the recent weakness in the pound has been attributed to the possibility that a minority government in the UK will not be able to achieve the necessary debt-reduction measures needed to maintain a AAA rating.

Nevertheless, focus in FX this morning continued to be on the dire situation in the UK, leaving GBP/USD lower by 146 pips at 1.5058 this morning after the pair traded in a range between 1.5021 and 1.5207 so far today. Short term resistance lies at 1.5575 with support at 1.4873 and 1.4784.

Mr. Papandreou Goes to Berlin

In Europe, all eyes are ears are on a visit from Greek Prime Minister George Papandreou to Berlin, where the lawmaker will seek the support of German Chancellor Angela Merkel.

Earlier this morning, in an interview with Frankfurter Allgemeine Zeitung, Papandreou said believes that if Berlin and the rest of the European Union agree to back Greece’s debt reduction program, it will help the nation raise the needed capital to finance its spending.

“We have not asked German taxpayers to pay for our pensions and holidays,” said the lawmaker. “That there is European support so that we can borrow money under better conditions. That is all we need."

Meanwhile Merkel is facing political pressure about backing Greece financially, a development which has put additional weight on the euro in recent days.

Elsewhere, the verbal support for Greece was strong with European Central Banker Mario Draghi telling reporters in Rome that the success of yesterday’s €5.0 billion bond auction demonstrates that Greece has convinced Europe of its sincerity to reduce its deficit, and in an interview with Deutschlandradio, Eurogroup President Jean-Claude Juncker said he doesn’t anticipate that Greece will require outside funding to correct its deficit, but that the nation has the full support of the European Union.

However the picture is not yet rosy. Greece’s €5.0 billion ten-year note auction may have been successful on Thursday, but an upcoming wave of debt sales from other euro zone nations may hinder the country’s ability to roll finance the rest of its deficit, according to an article in the Wall Street Journal on Friday.

Indeed, Greece’s ten-year note auction on Thursday was well bid, with the country raising €5.0 billion in the face of €14.5 billion in bids.

Nevertheless, the entire euro zone is looking to raise over €1.0 trillion in debt this year, paling in comparison to the €54 billion Greece needs to borrow to finance this year’s maturing debt and interest payments in Greece alone.

If demand for Greek debt appears to waver, expect another leg down in the euro as the fragile confidence from the last couple days gets shattered.

EUR/USD last traded flat at 1.3581 ahead of the nonfarm payrolls report in the U.S. So far today the pair has traded in a range of 1.3569 to 1.3607. Short term support lies at 1.3436 and 1.3424, with resistance at 1.3736 and then 1.3788.

Greek Austerity Package to Be Unveiled Wednesday

In the absence of any major economic news for the region, euro traders continued to focus on developments in Greece for direction.

According to Dow Jones Newswires, an unnamed European official said that an announcement for Greece to receive an austerity package worth €4.0 billion will likely be announced on Wednesday. Another official told the news agency that Greece is planning to raise €3.0 to €5.0 billion through the sale of a new ten-year note.

Meanwhile this morning, an EU spokesperson said that today’s talks have focused on Greece’s efforts to correct its budget imbalances and did not include a bailout plan for the beleaguered nation.

The debate is expected to come to a head on Friday, when Greece Prime Minister George Papandreou visits German Chancellor Angela Merkel to persuade her that the nation is doing everything necessary to correct its budget problems.

A bailout package for Greece is widely unpopular among French and German voters, and Greece is looking repair its battered image.

Meanwhile on Tuesday morning, EUR/USD appears to have given up some of its losses, last trading higher by 5 pips at 1.3566. So far today, the pair has traded in a range of 1.3436 to 1.3577. Short term support lies at 1.3424, with resistance at 1.3683.

If Greece manages to persuade the markets that its debt reduction plans are credible, look for the euro to bounce.

Greece Remains the Focus on Monday’s Asia-Pacific Session

Greece continues to be all the talk during Monday’s Asia-Pacific session with rumours of a massive bailout package giving equities a bit of a boost.

According to German newspaper Der Spiegel on Sunday, the euro zone nations are considering a €20 to €25 billion aid package to Greece.

According to the article the share is calculated according to the proportion of capital which each European nation holds at the European Central Bank, said the magazine, citing talks held when the body first began considering aid for Greece.

Allegedly, German officials have declined to comment on the report.

Meanwhile, in an interview with Welt-am-Sonntag Greek Finance Minister George Papaconstantinou said the euro’s problems extend beyond Greece’s budget concerns with the financial markets are betting on another euro zone nation to experience similar problems, deepening the problems in the region.

Indeed speculation over the concerns in Greece have been responsible for the weakness we’ve seen in European bonds this week, and this sentiment has continued despite assurances from the European Community that Greece will not default on its debts. The current concern is that another euro zone nation will announce similar problems to Greece, a development which would likely weigh further on the euro even if much of it has been priced into the markets already. Should the euro zone successfully and credibly defend itself from this speculation down the road, expect the euro to rally.

Finally, speaking in an interview with BBC news, Greek Prime Minister George Papandreou said the nation does not want financial aid from the European Union, just time and political support.

As stated in the past, a bailout of Greece is not likely to be of much help to the euro whose credibility had already been damaged by the willingness of the euro zone nations to bailout the Greeks in the first place. That being said, if the euro zone can credibly convince the markets that no other country in the union will suffer the same fate as Greece, the euro should make a comeback.

EUR/USD last traded higher by 24 pips at 1.3637 after trading in a range of 1.3602 to 1.3648 so far today.
Short term support lies at 1.3444, followed by 1.3424 and 1.2886 with resistance at 1.3647, 1.3788, and 1.3801.

Poor Data and News Deepens Sterling’s Declines

Although all currencies have been under pressure after Thursday’s surprising 25 bps hike in the discount window to 0.75%, the pound sterling is taking is harder than others on the back of a poor retail sales report and more concerns over the country’s fiscal position.

UK retail sales excluding fuel fell 1.2% month-over-month in January despite calls for a smaller 0.5% pullback and the prior 0.5% gain, and annual sales rose 2.6%, beating forecasts for a 1.1% pickup, but slower than December’s 2.9% gain.

GBP/USD lost 37 pips on the announcement, although the losses were short lived, and were quickly recovered.

Meanwhile, after 20 influential economists attacked the UK government for failing to cut spending last week, 67 economists including two Nobel Prize winners have backed the Prime Minister, arguing that it is too early to withdraw stimulus.

In articles in the Financial Times, both Joseph Stiglitz and Robert Solow have argued that a move geared at reducing the UK’s budget deficit will stifle the embers of economic recovery in the island-nation, agreeing with the assessment from the Chancellor of the Exchequer, Alistair Darling.

The comments add to the woes of the pound sterling which has been under pressure in part because of its deteriorating budget position.

GBP/USD last traded lower by 132 pips at 1.5397, after trading in a range of 1.5357 to 1.5542 today. Short term resistance lies at 1.5816 with support at 1.5296.

EUR/GBP last traded higher by 651 pips at 0.87773 after trading between 0.87033 to 0.87913 today. Short term resistance lies at 0.87481 with support at 0.86580.

Sterling Under Pressure After Poor Data & Downbeat Comments From BOE Member

The pound sterling has been under pressure throughout the morning on Thursday after a poor public finances report and downbeat comments from a Bank of England Monetary Policy Board Member.

UK’s public finances fell £11.8 billion in January, less than calls for a £20.0 billion pullback and reversing a £16.3 billion gain in December.

Public sector net borrowing rose £4.3 billion despite forecasts for a £2.6 billion slide and prior £14.0 billion increase.

The news sparked a 47 pips sell off in GBP/USD to 1.5577.

Also weighing on the pound were comments from Bank of England Board Member Kate Barker in an interview Newsletter on Thursday morning, saying that the country’s economic recovery is “quite hesitant”, and that it is possible for the UK to experience another quarter of contraction.

The comments illustrate the difficulties which the country has been facing in recent months and are consequently adding to the woes of the British currency on Thursday.

The GBP/USD last traded lower by 73 pips at 1.5599 after trading in a range of 1.5575 to 1.5688 today. Short term resistance lies at 1.5816 with support at 1.5560.

Meanwhile, EUR/GBP is up 257 pips at 0.87073 after trading in a range of 0.86644 to 0.87170 today. Short term resistance lies at 0.87459 with support at 0.86580.

Sterling Takes Back Some Losses After Poor Employment Report and Dovish BOE Minutes

Sterling is recovering earlier losses after a dismal employment report and dovish minutes from the Bank of England sent the currency plummeting earlier on Wednesday morning.

UK jobless claims unexpectedly rose by 23.5k in December despite calls for a 10.0k decline and prior 9.6k pullback the month prior.

The claimant count rate was unchanged at 5.0%, as expected, as was the ILO unemployment rate at 7.8%.

Meanwhile minutes suggest that the BOE vote to leave monetary policy unchanged on Feb. 4 was unanimous, but that for some members, the decision was “finely balanced”.

Nevertheless most members agreed that the February data did not suggest that inflation would undershoot over the coming months, and consequently, that additional monetary stimulus was not necessary for the time being.

Already under pressure ahead of the releases, sterling declined an additional 24 pips on the news, touching off 1.5738 before declining global risk aversion helped recover to the current 1.5790 level.

So far today, the pair has traded in a range of 1.5738 to 1.5816. Short term resistance lies at 1.5892 with support at 1.5560.

Meanwhile, the reports sent EUR/GBP higher by 134 pips to 0.87411 before quickly retracing lower to 0.86993.

So far today, EUR/GBP has traded in a range of 0.8704 to 0.87411 today. Short term resistance lies at 0.88416 with support at 0.86580.

Sterling Pops Despite In Line CPI

Sterling popped modestly higher on the back of some relatively in line inflation data earlier this morning, which prompted verbal action from the head of the Bank of England, as well as the Chancellor of the Exchequer.

According to the ONS, UK CPI fell 0.2% month-over-month in January, further than calls for a 0.1% decline and reversing a 0.6% contraction in December. Annual CPI was up 3.5%, in line with expectations and faster than the prior 2.9% pickup.

As usual, the results have prompted the central bank government to write a letter to the Chancellor of the Exchequer explaining why inflation was above the 3.0% threshold, however, this was also expected by the markets.

In the letter, BOE Governor Mervyn King said the jump in inflation is expected to disappear as slack in the economy brings down prices.

The comments are in line with warnings from the Bank of England which predicted a temporary spike in inflation in the region.

Responding King's letter, UK Chancellor Alistair Darling said he agrees that inflation in the UK will decline, and that the central bank's economic outlook remains consistent with that of the Federal government.

Although in theory the data was priced into the markets, GBP/USD nevertheless added 18 pips to 1.5707 before retracing the moves.

So far today, the pair had traded in a range of 1.5654 to 1.5730. Short term resistance lies at 1.5765 with support at 1.5560. With this morning's CPI report in line, the gains in the pound are also being driven by a decline in risk aversion worldwide.

Sterling Under Pressure As Debt Concerns Grow

Sterling Under Pressure As Debt Concerns Grow

The pound sterling is under some pressure at the start of the week, following concerns from some key economists over the government's debt reduction programs, along with another ripple of concerns from Dubai World.


In a letter addressed to the Sunday Times on Monday, 20 influential UK economists including some of the BOE's Monetary Policy Board said the UK's debt reduction program lacks urgency and that the country should attempt to eliminate the country's deficit within five years.

However, government officials continue to press the fact that the time is not yet right to withdraw some of the simulative policies adopted to fight the financial crisis.

Responding to the letter in an interview with BBC Radio 4, UK Chancellor of the Exchequer Alistair Darling says he disagrees with the needs to cut the deficit more quickly for fear of snuffing out the beginnings of an economic recovery in the region.

The implications for FX are mixed. Essentially, faster budget cuts in the UK would in theory help the currency's credibility and strengthen the pound, particularly in the short term.

That being said, if Darling is correct that cutting the deficit could send the UK into another recession, the longer term prospects on the pound could be weakened.

Also weighing on the pound is a report that investors of Dubai World could face losses after all. Earlier on Monday, sources told Dow Jones Newswires that Dubai is looking at a plan to repay lenders 60% of investments over the next seven years.

Although the government has publicly denied the report, the comments are said to be weighing on sterling given the exposure of the British Banks to the Middle East.

Nevertheless, the moves have not been very drastic, and the pound was only lower by 38 pips at 1.5662 shortly after the North American markets would have opened if not for public holidays in the U.S. and Canada.

So far, the pair has traded in a range of 1.5613 to 1.5692. Short term resistance lies at 1.5765 with support at 1.5613.

Meanwhile, EUR/GBP is down 40 pips at 0.86761 after trading in a range of 0.86707 to 0.87029 today. Short term resistance lies at 0.88416 with support at 0.86580.

Euro Under Fire After PBOC Rate Hike & Poor GDP Data

The euro is under pressure on Friday after some downbeat GDP reports from the euro zone, coupled with a hike in the People’s Bank of China’s reserve ratio this morning.

German preliminary Q4 GDP came in flat on the quarter despite calls for a 0.2% pickup and prior 0.7% gain, while annual growth was down 2.4%, faster than forecasts for a 2.2% slide, but slower than Q3’s 4.8% contraction.

On the flip side, French Q4 preliminary GDP rose 0.6% quarter-over-quarter in Q4, faster than forecasts for a 0.5% pickup and the previous revised 0.2% gain, but annual growth was down 0.3%, in line with expectations and slower than Q3’s 2.3% slide.

Finally, euro zone preliminary Q4 GDP rose 0.1% quarter-over-quarter, slower than calls for a 0.3% pickup and prior 0.4% gain, and annual growth was down 2.1%, faster than expectations for a 1.9% decline and prior 4.0% pullback.

Adding to the downside for the European currency was an unexpected hike in the Chinese reserve ratio. Effective February 25, the minimum reserve requirement will be 50 basis points higher at 16.5% for large banks and 14.5% for smaller financial institutions.

The news came as a shock to the markets which saw a smaller than expected CPI gain earlier this week.

According to the local Xinhua news agency on Friday, the PBOC says the move is not a shift in monetary policy pledging to continue maintaining its moderately loose monetary policy.

The report also says that today hike in the reserve requirement is geared at absorbing some of the excess liquidity in the country’s financial system.

In the immediate aftermath of the announcement form the PBOC, EUR/USD plunged 48 pips to 1.3567. The pair last traded lower by 98 pips at 1.3595 after trading in a range of 1.3532 to 1.3695.

Support lies at 1.3631 followed by 1.3421. Resistance comes in at 1.3698 followed by 1.3802.

Accord Reached Over Greek Bailout Package

Accord Reached Over Greek Bailout Package

An accord over a financial assistance package for Greece has been reached, according to European Commission President Jose Manuel Barosso, exiting from meetings this morning.

He nevertheless declined to detail the program to help the beleaguered nation, adding that the official announcement will come later in the day.

In the aftermath of the news, European Union President Herman Van Rompuy said that the EC will closely monitor the implementation of the Greece debt reduction plan, along with regular consultations from the European Central Bank and the IMF.

This morning’s EU Summit began several hours late after top euro area leaders insist on holding talks ahead of the meeting. The unveiling of a comprehensive assistance package to Greece is expected later today, at an 11 a.m. EST press conference.

Market participants expect leaders to take this opportunity to lay out an assistance package for Greek and other heavily indebted euro zone nations.

On a side note, German Vice-Chancellor Westerwelle said that the Greek assistance package was a certainty. He added that German taxpayers will not provide the country with a blank check.

Also, in an interview with Bloomberg News, Austrian government spokesperson Szemeliker said that an IMF assistance package is one of the options being considered for Greece although a final decision has not yet been made.

While it appears likely that an assistance plan will help the euro against major currencies in the short run, the long term repercussions on the currency are dire. Indeed a bailout of a euro zone nation constitutes a moral hazard to the European currency, and this stigma will likely take decades to erase.

The announcement from Barosso sent the euro higher by 28 pips to 1.3752 before heading back below pre-announcement levels. So far today, the cross has traded in a range of 1.3708 to 1.3801. Support lies at 1.3676 followed by 1.3586. Key resistance comes in at 1.3812 followed by 1.40.

Sterling Under Pressure Over Dovish BOE Talk

Sterling Under Pressure Over Dovish BOE Talk

Sterling is under pressure following some dovish comments from the UK’s central bank on Wednesday morning.

Earlier in the day the Bank of England’s Quarterly Inflation Report cut the central bank’s 2011 GDP forecasts to a 3.2% growth rate from a 4.0% level previously, but said that inflation will peak at 3.3% in Q1 2010 before slowing to 0.9% in Q1 2011.

Indeed, inflation control is at the core of the Bank of England’s mandate, charged with delivering inflation at or near 2.0% year-over-year. Consequently, as long as low inflation indeed prevails in the UK, it means that interest rates can remain low for some time, and the BOE will be able to maintain accommodative monetary policies. This in theory is negative for the pound.

Adding to the downside were comments from Bank of England Governor King who told lawmakers in London that it remains “far too soon” to conclude that the central bank will no longer need to buy government bonds, and that there is no good reason for the country to lose its AAA credit rating.

While the comment over the credit rating is a positive for the pound, any hint that the central bank could increase its bond purchases is extremely dovish or the markets, particularly given that expectations are for no more quantitative easing to enter the UK.

On the flip side, the pound has largely ignored some very upbeat economic data out of the UK earlier this morning.

UK industrial production rose 0.5% month-over-month in December, above calls for a 0.2% increase and prior 0.4% gain, while annual production was down 3.6%, slower than forecasts for a 4.1% pullback and prior 5.7% slide.

Meanwhile, UK manufacturing production rose 0.9% month-over-month in December, faster than expectations for a 0.3% pickup and prior 0.2% gain, and annual production fell 1.9%, slower than forecasts for a 3.0% pullback and prior 4.9% decline.

Market reaction to the data was negligible, with the pound now lower by 80 pips at 1.5639 USD on the day after trading in a range of 1.5632 to 1.5765. Support is at the top of the old range at 1.5632 followed by 1.5552. Resistance is at 1.5800.

PIMCO Says German Bunds More Attractive Than T-Notes

The euro continues to remain weaker against the USD despite the view that German Bonds may be a better buy than U.S. Treasuries.

In an interview with the Wall Street Journal on Monday, the head of the world’s largest bond holding company said “"Our favorite sovereign debt right now is some of the emerging economies that have suffered due to contagion, which we think will be reversed... And in the advanced economies, Germany, which we think has the best set of conditions of all the advanced economies when it comes to sovereign debt," he added.”

If true, should put upward pressure on the European currency against the USD, which has been clawing back losses against the U.S. dollar throughout the morning trading session.

The comments coincide with those of European Central Banker Ewald Nowotny telling with Wiener Zeitung on Monday that European bonds are experiencing a “speculative exaggeration” of risks, and were consequently artificially undervalued due to the fallout from Greece’s debt troubles.

On Friday, EUR/USD traded in a range of 1.3586 to 1.3746, and has traded in a range of 1.3622 to 1.3717 so far today. Support lies at 1.3619 followed by 1.3586. Resistance comes in at 1.3739 followed by 1.3755 and 1.40.

EURO

The euro gained after the European Commission endorsed Greece's plan to bring its deficit to below 3% of GDP by 2012 from 12.7% at the moment. Greek credit spreads tightened as the risk of default was pared back. At the same time, there were reports of euro buying from Korea's central bank and that also boosted EUR.

EU Wants Tough Measures From Greece

The European Union will publish a plan for Greece this week, according to Greek newspaper Ta Nea, under the headline "Urgent measures to be taken by May 15, 2010". The package includes demands to "cut average nominal wages, including in central government, local governments, state agencies and other public institutions". It also suggests new taxes on luxury goods and proposals to speed up tax payments by the self-employed. The recommendations are due to be made public on Feb. 3, according to the report. The Greek finance ministry said in a statement the measures outlined in the report were already included in its own deficit-cutting program.

Pound is Down

There were some disappointing numbers out of the United Kingdom on Tuesday. The UK economy returned to growth in the fourth quarter after six consecutive quarters of contraction but fourth quarter annualized GDP expanded just 0.1%; lower than the +0.4% expected. The lowest estimate of the 30 economists surveyed by Bloomberg was +0.2% so the reading is much worse than expected. It was also weaker across all segments of the UK economy as both the manufacturing and service sectors grew by 0.1%.The data led to a swift fall in the pound sterling; it is the worst-performing major currency on Tuesday and down by a full cent against the U.S. dollar.

Euro Interest in Greek 5-Year Note Sale

Yay for the Euro!!!

The euro made gain on Monday on reports of strong interest in a proposed Greek 5-year note sale. Greece was able to raise 5 billion euros in the first 30 minutes of selling and a total of 9 billion euros in sale. Focus will remain on the PIIGS countries (Portugal, Italy, Ireland, Greece Spain) in the day ahead with Portugal set to deliver its budget on Tuesday.

Euro Strengthens After Upbeat Economic Data & ECB-Speak

Yay for the Euro!!!

The euro is stronger on Friday after some upbeat economic data and a barrage of comments from European Central Bankers earlier in the day.

Earlier in the day Eurostat reported that industrial new orders were up 1.6% month-over-month in November, faster than forecasts for a 0.5% increase and better than the prior 1.9% pullback. Annual orders fell 1.5%, also better than expectations for a 7.1% contraction and prior 14.4% decline.

Meanwhile, on the policy front, in an op-ed piece in the Financial Times, Greek central bank head, George Provopoulos said that it will be "unequivocally easier" for Greece to resolve its problems within the framework of the euro zone.

Also of interest were comments from Governing Council Member Jose-Manuel Gonzalez-Paramo that the very idea of a European bailout of Greece from its budget problems was "absurd".

EUR/USD last traded higher by 40 pips at 1.4123 after trading in a range of 1.4066 to 1.4166 so far today. Short term support lies at 1.4066 and 1.4029. Resistance comes in at 1.4221.

While the comments and the data appear to have taken some of the negative focus away from Greece, the big questions remains how EUR/USD will react to the Obama Administration's latest initiative to limit the size of U.S. banks.

Earlier on Friday, Reuters' sources reported that U.S. Treasury Secretary Timothy Geithner is allegedly concerned that the recent measures might hurt the competitiveness of the broader financial system.

The report contrasts with an interview which Geithner gave on Thursday with PBS, where he said that banks should not use the U.S. government's safety net to subsidize risky behavior, and that financial institutions should not be allowed to become so big that they threaten the U.S. financial system.

The FX fallout from these comments are abstract given the lack of confidence from Geithner's decision. In theory, confidence in the USD could be shaken if Obama's administration doesn't appear to be behind the latest initiatives.

USD Rises On Talk the PBOC Will Continue Tightening Monetary Policy

More info....

The U.S. dollar is outperformed only by the commodity currencies on Thursday morning in the aftermath of speculation the PBOC will continue tightening monetary policy.

Earlier in the day, Chinese real GDP advanced 10.7% year-over-year in Q4, above the expected 10.5% gain and the revised 9.1% increase in the previous quarter, prompting speculation of additional monetary policy tightening in the region.

Indeed, China's December CPI gained 1.9% year-over-year in December, overarching the expected 1.4% increase and the previous 0.6% rise. Meanwhile, producer prices rose 1.7% on the year, above expectations for a 0.8% rate, and following the 2.1% decline in November.

Following the publication of the results, the People's Bank of China hiked the yield on three-month bill by 4 bps to 1.4088%, its second such move in 2009, and in a press conference, Chinese head of the National Bureau of Statistics Ma Jiantang told reporters in Beijing that the country now faces the challenges of balancing economic growth and inflation.

On the surface, the key question remains how quickly the central bank is willing to tighten policy in response to the data. After all, the PBOC has already raised the yield on three month bills twice this year and the yield on one year bills once.

More importantly, however was the 50 bps increase in the reserve ratio on financial institutions, which effectively means banks need to hold a greater proportion of liquid cash in the vault to cover their deposits. Such a move forcibly pulls money from the financial system and forces interest rates higher.

So far this month, tighter monetary policy from China has meant a stronger USD and yen, and this morning was no exception.

So far today, EUR/USD traded has in a range of 1.4029 to 1.4137, after last trading lower by 22 pips at 1.4083. Short term support lies at 1.4008 with resistance at 1.4512.

Meanwhile, cable last traded lower by 66 pips at 1.6226 after moving in a range of 1.6126 to 1.6312 today. Short term resistance lies at 1.6458 with support at 1.6116.

USD/JPY traded in a range of 91.19 to 91.88 today, and was last higher by 31 pips at 91.55. Short term resistance lies at 92.05 with support at 90.32.

Sterling Spikes After BOE Minutes & Jobless Claims

Srerling! Sterling!

Sterling is managing to outperform all but the USD and yen on Wednesday after a strong employment report, and talk that the Bank of England was shifting to a neutral stance.

Earlier in the day it was reported that the Bank of England unanimously voted to leave rates at 0.50% and the Asset Purchase Facility unchanged at 200 billion when the Monetary Policy Committee last met on Jan. 7.

More importantly however was the affirmation that it is becoming "increasingly probably" that CPI will rise to "well above" the 2.0% target in early 2010, and that CPI will return to target after near term price shocks have work their way through.

The development suggests that the central bank is moving away from additional monetary policy easing, a development which although suggested, had yet to be priced into the markets. In theory, this should support a stronger pound sterling.

In addition, the Office For National Statistics said that UK jobless claims fell 15.2k in December, further than expectations for a 4.6k pullback and revised 10.8k fall in November.

The claimant count rate was unchanged at 5.0%, as expected.

In the immediate aftermath of the announcements, which both came simultaneously, GBP/USD rallied 43 pips to 1.6324, while EUR/GBP fell 228 pips to 0.8707.

Nevertheless, the USD has managed to be the big winner of the day on the back of earlier reports that China was tightening bank lending, and a fresh snag in the U.S. Healthcare overhaul bill, as Senate Democrats lost a critical vote after Republicans snagged the seat in Massachusetts last night.

GBP/USD last traded lower by 65 pips at 1.6286, having traded in a range of 1.6244 to 1.6372 so far today. Short term resistance lies at 1.6458 with support at 1.6211.

EUR/GBP last traded lower by 794 pips to 0.86526, after trading in a range of 0.86528 to 0.87345. Short term resistance lies at 0.86957 with support at 0.86313.

Euro Under Pressure, Sterling Holds Its Ground

Yikkesssssss

The U.S. dollar is outperforming the European currencies on Tuesday, but the euro is the biggest lower after some downbeat economic news for the regions.

Earlier on Tuesday the German ZEW economic optimism index fell to 47.2 in January, further than expectations for a decline to 50.0 from 50.4 the month prior and the current conditions index rose to -56.6, less than expectations for an increase to -56.2 from -60.6.

In the minutes following the announcement, EUR/USD fell 34 pips to 1.4321, before moving lower to an intraday low at 1.4264.

The currency has also been under added pressure throughout the morning on the back of concerns surrounding Greece’s ability to finance its budget deficit.

The next support level to watch will be 1.4258, followed by a critical support level at 1.4218, a breach of which will open the way for a new four-month low in the pair.

Across the Channel, sterling remains under pressure against the U.S. dollar, but is outperforming other major currencies after an inflationary CPI report on Tuesday.

CPI rose 0.6% month-over-month in December, faster than calls for a 0.3% increase and prior 0.3% gain. Annual CPI was up 2.9% compared to calls for a 2.6% increase and prior 1.9% pickup.

In the immediate aftermath of the release, GBP/USD rallied 37 pips to a fresh intraday high at 1.6458, as markets participants priced in a more hawkish response from the Bank of England, whose mandate it is to control inflation.

Sterling’s resilience on Tuesday is also being attributed to a deal being struck between Kraft Foods buying UK confectioner Cadbury for $19 billion. The deal seals months of bargaining between both firms and is a boon to the pound sterling given that Kraft will logically have to buy pounds to pay for the deal.

Sterling nevertheless remains weaker against the U.S. dollar, which has benefitted from tighter monetary policy in China.

So far today, GBP/USD has traded in a range of 1.6320 to 1.6458. Short term resistance lies at 1.6421 with support at 1.6137.

Meanwhile, EUR/GBP has traded in a range of 0.8731 to 0.88104 today. Short term resistance lies at 0.89670 with support at 0.87053.

Euro Under Pressure As Finance Ministers Meet

Euro is under pressure!!! Looks like it needs a massage..hehehe...

The euro is under some pressure on Monday on the back of a light day for economic news and data, and as euro zone Finance Ministers meet to discuss the fate of Greece.

Finance Ministers from euro zone nations are meeting in Luxembourg for a regularly scheduled meeting on Monday, where a variety of topics will be discussed from the economy, to the reappointment of Eurogroup President Jean-Claude Juncker, to the debate over who will be the next Vice-President of the European Central Bank, to Greece’s fiscal position.

There is talk from traders that the group is planning a harsh statement on the state of Greece’s public finances, as well as the disorganization within the country’s national statistics agencies.

The moves in the European currency are also being influenced by a low-volume trading day in the United States, which is closed for Martin Luther King Jr. Day.

EUR/USD last traded lower by 13 pips at 1.4374. So far today, the pair has traded in a range of 1.4335 to 1.4394. Short term support lies at 1.4335 with resistance at 1.4579.

Meanwhile, EUR/GBP last traded at 0.88101, down 351 pips. So far today, the pair has traded in a range of 0.87826 to 0.88395. Short term resistance lies at 0.90282 with support at 0.8772.

The question lies in whether or not the meeting will yield anything that the markets haven’t already priced in.

Euro Under Pressure After Status Quo ECB Policy

Euro is still under pressure!!!

The euro remains under pressure on Thursday after the European Central Bank suggested the status quo monetary policy for the coming months.

After leaving its benchmark interest rate unchanged at 1.00%, as expected on Thursday morning, central bank President Jean-Claude Trichet affirmed that rates were “appropriate” and that the economy would continue to expand at a “moderate” pace with inflation “subdued over the policy-relevant horizon”.

While the rhetoric appeared similar to that of previous meetings, the differences came on the subject of Greece, whose debt rating now falls below the minimum standards to be accepted at the central bank’s open market operations.

“We will not change out collateral framework for the sake of any particular country”, said Trichet when asked whether or not the ECB would consider making an exception for Greek government bonds.

Earlier this morning Greece unveiled plans to bring the country’s spending within the limits outlined by the European Union by 2012. In addition, a new report from the Moody’s ratings agency suggests that the country has little time to address its budget concerns before facing further ratings cuts.

The comments, combined with the view that monetary policy would continue to remain loose, put downward pressure on the euro throughout the morning session.

At 11 a.m. EST, EUR/USD was down 47 pips at 1.4464 after trading in a range between 1.4459 and 1.4556. Short term support lies at 1.4554. The Fibonacci level at 1.4570 presents itself as the next resistance, followed by 1.4679.

Meanwhile, EUR/GBP was down 363 pips at 0.88756, after trading within 0.89695 to 0.89358. Key short term support is at 0.8847 with resistance at 0.8953, 0.9027 and 0.9055.

Sterling Strengthens After Hawkish Comments from BOE Member

Getting even stronger....!!!!

Sterling is Wednesday’s outperformer after some hawkish talk from a Bank of England policy maker earlier this morning.

Bank of England Monetary Policy Committee Member Andrew Sentance told the Guardian newspaper that the central bank should pause its bond purchases to as to gauge the risks to inflation.

Furthermore, when asked whether investors should bet on stable interest rates for 2010, he responded, “It would not be wise to put yourself in that camp. A lot can happen in a year.”

The comments were enough to offset an unexpectedly weak manufacturing report from the region.

The country’s November manufacturing production came in flat for November despite forecasts for a 0.2% increase and after a flat reading the previous month’s level.

Annual production was down 5.4% in November, faster than forecasts for a 5.1% decline and prior 7.8% slide.

Meanwhile, industrial production rose 0.4% month-over-month in November, faster than calls for a 0.3% increase and prior flat reading, and annual production was down 6.0%, just slower than expectations for a 6.1% slide and previous 8.4% contraction.

In the immediate aftermath of the release, GBP/USD briefly popped lower by 29 pips to 1.6238, before rebounding higher.

GBP/USD last traded 122 pips higher at 1.6286 after trading in a range of 1.6137 to 1.6294 today.

Short term resistance lies at 1.6341 with support at 1.5897.

Note that Sentance is a well known hawk on the central bank’s board, and some traders have said the pound’s gains have been over exaggerated.

Sterling Outperforms After Strong Economic Data

Ohhhh the Brits!!!! It's all about sterling baby!!! Start buying...?!?! Post comments below!

Sterling is one of the top performing currencies on Tuesday on the back of some strong economic data in the overnight.

Earlier in the day, the UK’s visible trade deficit fell to £6.784 billion in November, further than calls for a decline to £7.0 billion from a revised £7.016 billion in October.

Exports were up 0.1% month-over-month, while imports declined 0.8%.

In the immediate aftermath of the release, sterling, already under pressure from gains in the USD, rallied 14 pips to 1.6112 before reaching an intraday high at 1.6194 several hours later.

Also supporting the gains was an earlier report from the British Retail Consortium, which said that retail sales rose 6.0% year-over-year in December after a 4.1% gain the month prior.

GBP/USD last traded 64 pips higher at 1.6179 after trading in a range of 1.6063 to 1.6181 today. Support lies at 1.6054 and 1.6050 followed by 1.5955 and 1.5900. There is resistance at 1.6194.

Meanwhile, EUR/GBP last traded 221 pips lower at 0.89840, after trading in a range between 0.89623 and 0.90282. Short term support is at 0.8923 with resistance at 0.9055.

CHF Falls After More Intervention Talk from SNB

Omg is this possible...the swiss frank is going downhill!!! Does that mean it will be cheaper for us to buy chocolate or cheese?!? hehe. or go on luxurious ski trips to Gstaad or St. Moritz? I sure hope so!!! :)

The Swiss Franc is weakening after talk of more currency interventions from the Swiss National Bank.

Earlier on Monday, SNB Chairman Philip Hildebrand said the central bank will act to prevent an “excessive appreciation” of the Swiss franc, promising to “monitor foreign-exchange developments very closely.”

Trader says the SNB intervened earlier this morning to support the currency against the U.S. dollar and euro.

Indeed, EUR/CHF jumped 38 pips to an intraday high of 1.4795, while USD/CHF spiked 33 pips to 1.0205.

In the past, policy makers have expressed a particular desire to control the franc’s gains against the euro, Switzerland’s largest trading partner.

SNB board members feared that a stronger Swiss franc will cause deflation, a scenario which the central bank is mandated to prevent.

EUR/CHF last traded higher by 7 pips at 1.4760 after trading in a range of 1.4724 to 1.4795 today. Support lies at 1.4724 with resistance at 1.4795 and 1.4827.

Meanwhile USD/CHF last traded lower by 85 pips at 1.0152 after trading in arrange between 1.0131 and 1.0242. Resistance lies at 1.0420 with support at 0.9988.

EUR/USD Ignores Economic Data Ahead of U.S. Nonfarm Payrolls

Even More.....Oh Boy....

EUR/USD has largely ignored a series of mixed economic data for the region on Friday, as markets await nonfarm payrolls.

Ahead of the key economic release for the United States, EUR/USD traded lower by 15 pips at 1.4291.

The moves come after a barrage of economic news for the region, including final Q3 euro zone GDP being unrevised, with the economy growing 0.4% quarter-over-quarter, as expected. Annual growth, however, was revised lower by 4.1% despite calls for no change to the preliminary reading of a 4.0% pullback.

Meanwhile, the Euro zone unemployment rate rose to 10.0% in November from the upwardly revised 9.9%. Forecasts had been for an increase to 9.9% from an unrevised 9.8% level.

Over in Germany, the trade surplus surged to €17.4 billion in November, above calls for a decline to €12.5 billion from €13.4 billion the month prior, with exports up 1.6% month-over-month, faster than forecasts for a 0.8% increase but slower than October’s 1.9% pickup.

Also, German industrial production advanced 0.7% month-over-month in November, short of calls for a 1.0% increase and faster than October’s 1.7% pullback. Annual production down 8.0%, faster than calls for a 7.8% fall, but slower than the prior 12.3% contraction.

So far today, EUR/USD has traded in a range of 1.4276 to 1.4335 so far today. Short term support lies at 1.4258 with resistance at 1.4484.

Euro Under Pressure After Series of Broadly Negative Data

Ohhhhhhhhh the Euro is under..... Pressure!!!! What did i tell you guys about the Euro..we got to watch out...!!!

The euro is under pressure on Thursday after a broad bout of downbeat economic data throughout the morning.

German retail sales fell 1.1% month-over-month in November despite forecasts for a 0.3% increase and prior flat reading, and annual sales were down 2.8% compared to expectations for a 1.7% contraction and prior 1.6% pullback.

Also, German factory orders rose 0.2% month-over-month in November, short of forecasts for a 1.5% increase and partially offsetting a 1.9% decline in October, while annual sales were down 1.8%, faster than calls for a 0.2% decline and prior 8.2% pullback.

Turning to the euro zone, retail sales fell 1.2% month-over-month in November despite forecasts for a flat reading and the prior 0.2% gain, and annual sales contracted 4.0%, faster than forecasts for a 1.9% decline and prior 1.3% decrease.

The only real good news was euro zone business climate index rising to -1.22 in December, above expectations for an increase to -1.43 from -1.53 the month prior, while the economic confidence index expanded to 91.3, also above expectations for a reading of 90.0 and the prior 88.8. Consumer confidence index increased by one point to -16 as expected in December.

EUR/USD was under added pressure throughout the morning after the People’s Bank of China tightened monetary policy by selling three-month bills at a yield of 1.3684%, the first increase in 19 weeks. Traders say the move constitutes monetary policy tightening as it means higher interest rates in the region.

The move also served to strengthen the USD to which the Chinese yuan is tied.

Ahead of the opening Bell on Wall Street, EUR/USD last traded lower by 72 pips at 1.4333 after trading in a range of 1.4299 to 1.4447 so far today. Short term support lies at 1.4258 with resistance at 1.4484.

Euro Under Pressure After ECB Member Says No Bailout for Greece

Hey everyone, I am in Athens and it is freezing here. looks like another thing that is dropping degrees is the Euro... check out this article i found and enjoy reading it as much as I did..

The euro is under pressure on Wednesday after comments from European Central Banker Jurgen Stark telling Il Sole 24 Ore that investors must not assume that the EU will bail out Greece.

"Whoever believes that, at the end, the European Union state member will put their hands in their pockets to save Greece, will end up deluded," said the central banker.

Although he affirmed that Greece would likely deal with its fiscal problems without any outside aid, Stark was firm saying that a bailout should not be a foregone conclusion.

Responding to Stark’s comments in an interview with Bloomberg TV, Greek Finance Minister George Papaconstantinou said the country will not need a bailout to tackle its budget problems, and that Stark’s comments were misplaced.

"Frankly we don't need that clarification," Papaconstantinou told Bloomberg Television. "We don't expect to be bailed out by anybody as, I think, it is perfectly clear we're doing what needs to be done to bring the deficit down and control public debt."

The comments are significant to the euro which fell heavily in December after ratings agencies downgraded the country’s sovereign debt rating to levels substandard to ECB open market operations.

EUR/USD last traded lower by 15 pips at 1.4349 after trading in a range of 1.4284 to 1.4383 so far today. Short term support lies at 1.4258 with resistance at 1.4484.

FX Ignores German Employment Report

Merkel, are you going to make some changes or not?! What is this woman thinking??? Her country is going downhill and we need to see some changes. I will be heading off to a different country in Euro soon and will post what I find. Lets think good thoughts for our German brothers!!!

Foreign exchange markets essentially ignored an in line unemployment report from Germany earlier this morning, despite some mild optimism in the numbers.

Earlier on Tuesday, German unemployment unexpectedly fell by 3k jobs for December despite calls for a 5k increase, and November’s 7k decline was revised to a 1k pullback.

The unemployment rate, however, remained unchanged at 8.1% as expected.

Meanwhile, the number of vacancies in German firms increased to 13k, a strong gain compared to the previous month’s 5k pickup.

The data bodes well for the euro zone’s largest economy as it suggests that the labour market in the region is in the process of bottoming out, a positive for the European currency.

Sadly, the euro failed to make any meaningful moves given the proximity of the results to the consensus forecasts.

So far today, EUR/USD has traded in a range of 1.4387 to 1.4484. Short term support lies at 1.4258 with resistance at 1.4536.

After the market open on Wall Street EUR/USD gave up its lead against the USD and last traded lower by 12 pips at 1.4401.

Sterling Spikes After Upbeat Manufacturing and Lending Data

Hello Chaps!!! I am still in London... and look what I got my hands on...It is all about the pund baby...looks like it's coming back..going to follow this and see what happens!

The pound sterling was given a lift on the back of some upbeat manufacturing data and better than expected credit statistics on Monday.

The UK manufacturing PMI surged to 54.1 in December, above calls for an improvement to 52.0 from 51.8 the month prior.

The data implies an acceleration in manufacturing activity for the UK with any reading above the 50-point threshold implying economic growth.

Details of the report were also strong, with the new orders index at its highest level in 29 months and the decline in jobs the slowest since May 2008.

Released simultaneously, UK net consumer credit fell £0.4 billion in November, less than calls for a £0.5 billion decline and prior £0.6 billion shortfall.

The move was led by an increase in mortgage lending for the month, which picked up to £1.5 billion compared to the previous month’s £1.1 billion level. Expectations had been for lending to total £1.0 billion.

Meanwhile, mortgage approvals rose to 60.5k from 57.7k the month prior, further than calls for a 58.0k pickup.

In line with the better than expected results, GBP/USD picked up 41 pips to 1.6210 before hitting new intraday highs at 1.6241. Short term resistance lies at 1.6248 with support at 1.5833.

By Erik Franco, erikf@fxtraderacademy.com