Thread: Euro Sprouts Wings Following ECB Rate Rise

Euro Sprouts Wings Following ECB Rate Rise

Pure FX
11.04.2011

The euro seems to have consumed several cans of red bull following the ECB interest rate decision last week.

Following the announcement from President Jean-Claude Trichet that the ECB has raised interest rates to 1.25% the common currency sprouted wings to soar above rivals including sterling.

However the rate increase is a kick in the stomach to indebted EMU nations such as Ireland, Portugal and Greece. These countries are buried beneath mountains of debt – and the ECB interest rate rise in fact adds to their burden.

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UK BRC Retail Sales Fall Flat In March

Pure FX
12.04.2011

Britain has had rather a mix of sunshine and rain in the last 24 hours. Economic releases have been less consistent than the England football team’s international performance.

First of all retail sales collapsed into a puddle last month declining -1.9% according to the BRC – the greatest one month decline since 1995. Furthermore the IMF added to the reasons not to celebrate – dropping British GDP forecasts for 2011 to 1.7% from 2.0%. This matches the rain-filled forecast made last month from the Office for Budget Responsibility.

However it hasn’t all been storm clouds and thunder from Britain. This morning for instance the UK trade balance deficit in February dropped to -£6.776bn.

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UK Inflation Falls Down A Notch

Pure FX
13.04.2011

Sterling took a bruising in the last 24 hours following the release of last month’s UK inflation data. Inflation fell a notch to 4.0% in March according to the ONS – landing beneath forecasts of 4.4%. This bruised the pound since it cuts the odds of the BoE upping interest rates in the short term.

Other gloom-filled data includes the latest UK retail price index. The RPI plummeted -0.5% last month - compared to forecasts of a confident stride 0.6% up.

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Obama Plans To Slash US Deficit

Pure FX
14.04.2011

US President Obama stepped up to the podium in the last 24 hours to counter critics that he had no credible deficit reduction scheme.

Speaking at George Washington University he promised to shave a mind-boggling $4 trillion from the US deficit – cutting $3 for each $1 in tax hikes. Headline-hogging journalists countered that the plan is emptier than Katie Price’s brain – but it has calmed investors biting their nails that the US could spend itself into oblivion.

It was sunshine and lollipops in the US for other reasons in the last 24 hours.

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Portugal To Become The EU Bottomless Pit?

Pure FX
15.04.2011

The outlook for the trio of indebted PIG countries blackened in the last 24 hours as each one suffered bad news.

Regarding Portugal the Head of business climate group IFO Hans-Werner Sinn said in an interview that the nation could become a bottomless pit as billions of euros are sucked in to repair its finances. Sinn told the Wall Street Journal that he doesn’t expect the Germans to ever again see their contributions.

Greece meanwhile faces a large chance of defaulting on its debt according to new data from Markit.

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Far-Right Finns To Block Portugal Bailout?

Pure FX
18.04.2011

There’s been another set of migraine-inducing reports from Europe over the weekend.

In Finland the anti-euro True Finns have rocketed to third place in the Finnish parliament – and could block an EU bailout for Portugal. True Finn leader Timo Soini told Reuters that he intends – ahem – changes to bailout plans.

This follows comments last week from IFO boss Hans-Werner Sinn that Portugal could become an EU bottomless pit.

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Greece To Plead Pennilessness?

Pure FX
19.04.2011

The euro has come down a notch in the last 24 hours following a series of nail-biting releases.

First of all reports have abounded that Greek Finance minister George Papaconstantinou told a newspaper that Greece could soon default i.e. plead pennilessness to the IMF and ECB to whom Greece owes billions.

This follows rocket-fuelled rises in interest rates on Greek bonds in recent weeks.

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Markets Calm Following Strong EU Data

Pure FX
20.04.2011

The panic surrounding PIG nations such as Greece has eased in the last 24 hours following robust EU manufacturing data. EU manufacturing increased +0.2 this month to 57.7 according to new figures from Markit. This compares to 57.5 in March.

In addition German manufacturing also rose according to Markit – rising 0.8 to hit 61.7 this month. The data has eased pressure on the euro because manufacturing is a strong indicator of EU economic strength.

However manufacturing aside the last 24 hours have not been good for EU data.

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US Dollar Takes A ‘Pounding’

Pure FX
21.04.2011

Sterling has been knocked about of late as confidence in the US and EMU has risen. To make matters worse British data has been lacklustre.

However in the past 24 hours sterling came out fighting against the US dollar – buoyed on risk appetite.

In British data meanwhile the latest BoE minutes have been released – and could bring sterling back down. The minutes revealed a 6-3 split against upping interest rates – bad for sterling since lower interest rates mean smaller returns on bonds.

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Focus On US Interest Rates

Pure FX
26.04.2011

The Easter break meant the market was quiet over the weekend. Currencies remained statuesque as investors enjoyed a deserved rest. However anticipation is rising ahead of the US interest rate decision later this week. It could have a massive impact on the dollar depending on rhetoric.

For instance if the Fed signals that interest rates are to remain subdued it could send the US dollar tumbling. This is because lower interest rates mean smaller returns on US bonds – prompting investors to look elsewhere. However if Fed Chairman Ben Bernanke indicates that interest rates could rise in coming months the US dollar could rocket.

In US data meanwhile confidence is up following strong US home sales figures.

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