by Hannah Wilson
Sterling / Euro and US Dollar exchange rates
The Pound rallied against the Euro and US Dollar during trading yesterday, rising up towards 1.1700 on interbank against the Euro and 1.5700 against the US Dollar after a news release confirmed that the U.S Federal Reserve in conjunction with five other central banks agreed to reduce the interest rate on Dollar liquidity swap lines by 50 basis points.
The Bank of Canada, Bank of England, Bank of Japan, the ECB and the Swiss National Bank are all involved in a coordinated action to bring stability to the market.
The purpose of these actions is to attempt to ease strains in financial markets and thereby mitigate the effects of such strains on the supply of credit to households and businesses and help foster economic activity.
European stocks rose for a fourth day with the Stoxx Europe 600 Index up 3%, while U.S futures rallied alongside the FTSE 100 Index. Risk appetite subsequently poured into the foreign exchange market with the Dollar and Yen weakening significantly against the majors. The biggest gains so far are the South African Rand, Australian Dollar and the New Zealand Dollar, as traders dump safe haven assets in favour of higher-yielding currencies.
In Europe, Italian bonds dropped, while the German one-year yield sank below zero for the first time in history. The Pound gained 0.6% against the U.S Dollar but dropped 0.7% versus the Euro, as volatility increased following the announcement.
European shares have slipped during early trade this morning, giving back a little of their strong gains of yesterday – Sterling has also declined just over 0.5% against the Euro and US Dollar.
The market will now be seeking further guidance from policymakers over their plans to help end the region’s debt crisis. French President Nicolas Sarkozy is due to make a key speech today in which he will try to reassure markets, European allies and anxious voters that he is on top of the financial crisis.
Spain’s borrowing costs could potentially leap towards 14-year highs today, as the euro zone enters a critical phase in its two-year debt crisis.
Euro / US Dollar exchange rates
The Dollar seems to be under pressure once again with risk appetite returning to the markets. After trading below $1.3300 yesterday morning, the Euro jumped to hit a high around $1.3530 during trading yesterday afternoon.
European shares have slipped during early trade this morning, giving back a little of yesterday’s gains with the EUR/USD market opening just underneath $1.3500
Despite the slight slippage on European Shares, FX markets seem to have steadied after the initial euphoria following the central banks’ decision to reduce the interest rate on Dollar liquidity swap lines by 50 basis points. However despite yesterday’s announcement markets will be waiting on further guidance from policy makers over a credible solution to the debt crisis.
Today’s Exchange Rate Data
FRA 06:30 – ILO Unemployment (Q3)
EU 08:58 – Markit Manuafcturing PMI (November)
UK 09:28 – CIPS Manufacturing PMI (November)
U.S 13:30 – Initial Jobless Claims (w/e 26th November)
U.S 15:00 – Construction Spending (October)
U.S 15:00 – Vehicles (November)
- The Pound declined against the Euro and the Euro rallied higher against the Dollar early yesterday
- Sterling Euro US Dollar Foreign Currency Forecast – The Pound rallied modestly against the Euro
- Pound Sterling, the Euro and US Dollar exchange rate news – The Pound rallied towards the highest level in six weeks against the Euro
- Sterling, US Dollar and Euro exchange rates – The Pound rallied against the Euro for the fourth day in a row
- Pound Sterling, the Euro and US Dollar exchange rate forecast – The Pound actually rallied against the Euro for the first time in six trading days