The Euro encountered resistance in the region of 1.3250 against the Dollar, but found support just above 1.32 in narrow ranges yesterday.
Sterling / Euro and US Dollar exchange rates
The Pound rallied through 1.50 against the Australian Dollar yesterday, as UK inflation slowed by less-than-expected and speculation increased that China’s economic growth will slow, reducing demand for the region’s exports. The Aussie weakened against the majority of the 16 most actively traded currencies, despite the release of the minutes from the RBA’s last policy meeting.
The report indicated that policy makers see less downside risks to the Australian economy, reducing the prospect of another cut in interest rates. However, the Aussie couldn’t stem the losses and the move above 1.50 will be of particular interest to those looking to purchase the Aussie Dollar. This is the best time to secure a rate all year having seen the market plunge to 27-year lows during the first quarter.
Swings in risk sentiment will also have a major impact on the pair and the decline in the Aussie coincides with a drop in Asian stocks overnight. It’s worth bearing in mind that should global stocks begin to rally, in all likelihood the Aussie will gain again. The Pound declined for a third straight day against the Euro, as we build up to the Chancellor’s 2012 budget today and the Bank of England MPC minutes.
Economists are predicting the budget will increase annual gilt sales to the second biggest amount on record. The Pound plunged to its lowest level in more than a week versus the Euro, with stubborn resistance in the region of 1.20. The minutes from the Bank of England’s last policy meeting will be closely watched this morning, particularly the voting pattern with a unanimous decision expected.
If one or more members dissented and voted for more quantitative easing this month, the Pound is likely to decline against the majors. The BoE chief economist Spencer Dale said yesterday that UK inflation may not slow as much this year, as consumer prices fell by less-than-expected, with tensions in the Middle East increasing oil prices.
Dale also said that the Pound’s decline will aid the rebalancing of the UK economy. The UK currency found support below 1.5850, although trading conditions were largely subdued. The headline consumer price inflation dropped to 3.4% but the RPI rate was higher-than-expected and there was an element of disappointment that the rate didn’t decline further.
Euro / US Dollar
The Euro encountered resistance in the region of 1.3250 against the Dollar, but found support just above 1.32 in narrow ranges yesterday. There were further concerns surrounding the Chinese growth outlook, which maintained a defensive tone towards risk appetite and provided net Dollar support, especially with increased concerns that German exporters would be damaged.
The U.S housing starts data was close to market expectations at an annual rate of 0.70 million for February, while permits also increased to the highest level since June 2008. The data helped maintain the recent optimism towards the U.S economy. The Fed Chairman Ben Bernanke stated that it would be a mistake to withdraw monetary stimulus too quickly, maintaining expectations that the Fed will adopt a very cautious approach over the coming months and that will tend to limit Dollar support.
U.K 09:30 – PS Net Borrowing (February)
U.K 09:30 – BoE Publishes Minutes of February Meeting
U.K 12:30 – Chancellor Delivers Budget 2012
U.S 14:00 – Existing Home Sales (February)
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