World First Foreign Exchange 16 March 2010: Hung, Drawn and Pounded

• Fears over hung parliament continues to damage pound
• YouGov shows Tory lead down to 4 points
• Fears over Chinese monetary tightening pushes stock markets lower
• Dollar supported ahead of the FOMC

All this and more is available on our blog. Click here  http://www.worldfirst.com/blog

We have warned since the beginning of the year that Monday trade for sterling is likely to be a painful experience and yesterday was no exception.

Sterling dropped over a percentage point against the dollar and by 0.75% against the euro as yet again another opinion poll suggested that the general election is likely to end in a hung parliament. Of course, this leads to the belief that no overall consensus in government means no clear decision making on fiscal issues and subsequently traders mark down the pound. We see no reason to change our wariness of Monday trade until after the election.

GBP was not helped by comments from Kate Barker, external member of the MPC, who warned that the UK may see another quarter of negative GDP before the year is out.

If sterling was the clear loser in trade yesterday then the dollar was the clear winner. Fears over monetary tightening in China (as explained in last night’s podcast) led to stock market falls around the world yesterday in turn strengthening the dollar. The greenback was also helped by a poor housing reading that saw risky assets slip further.

Today’s data highlight is the Fed decision at 18.15 GMT. The dollar is likely to remain supported as we head into the meeting although we expect no change in policy or language. We do expect that the lone dissenter from the previous meeting, Hoenig, will continue against the ‘extended period’ language. We also have German ZEW today which should show economic sentiment falling in Germany; a move lower for the euro as a result is expected. 

·         Fears over hung parliament continues to damage pound

·         YouGov shows Tory lead down to 4 points

·         Fears over Chinese monetary tightening pushes stock markets lower

·         Dollar supported ahead of the FOMC

All this and more is available on our blog. Click here  http://www.worldfirst.com/blog

We have warned since the beginning of the year that Monday trade for sterling is likely to be a painful experience and yesterday was no exception.

Sterling dropped over a percentage point against the dollar and by 0.75% against the euro as yet again another opinion poll suggested that the general election is likely to end in a hung parliament. Of course, this leads to the belief that no overall consensus in government means no clear decision making on fiscal issues and subsequently traders mark down the pound. We see no reason to change our wariness of Monday trade until after the election.

GBP was not helped by comments from Kate Barker, external member of the MPC, who warned that the UK may see another quarter of negative GDP before the year is out.

If sterling was the clear loser in trade yesterday then the dollar was the clear winner. Fears over monetary tightening in China (as explained in last night’s podcast) led to stock market falls around the world yesterday in turn strengthening the dollar. The greenback was also helped by a poor housing reading that saw risky assets slip further.

Today’s data highlight is the Fed decision at 18.15 GMT. The dollar is likely to remain supported as we head into the meeting although we expect no change in policy or language. We do expect that the lone dissenter from the previous meeting, Hoenig, will continue against the ‘extended period’ language. We also have German ZEW today which should show economic sentiment falling in Germany; a move lower for the euro as a result is expected.

Latest Exchange Rates At Time Of Writing Indicative Rates Sell Buy GBP/EUR 1.0974 1.1000 GBP/USD 1.5008 1.5031 EUR/USD 1.3661 1.3682 GBP/JPY 135.69 135.98 GBP/AUD 1.6419 1.6443 GBP/NZD 2.1330 2.1361 GBP/CAD 1.5282 1.5314 NZD/USD 0.7028 0.7049 GBP/ZAR 11.10 11.15 USD/ZAR 7.3908 7.4288 GBP/PLN 4.2570 4.2852 EUR/JPY 123.42 123.89 Rates are dependent on amount transacted. Please call 0207 801 9080 for a live rate quote.

Please feel free to contact me (jeremy.cook@worldfirst.com) if you have any questions or thoughts regarding these updates or if you are interested in a particular event in the calendar. If you would like to discuss your foreign exchange requirements, please contact our: Corporate Foreign Exchange Team on 020 7801 9050 or our Private Client Currency Exchange Team on 020 7801 9080. To view any past or present currency blogs please click on the following link www.worldfirst.com/blog. Disclaimer: The above comments are only our views and should not be construed as advice. You should act using your own information and judgement. Although information has been obtained from and is based upon multiple sources the author believes to be reliable, we do not guarantee its accuracy and it may be incomplete or condensed. All opinions and estimates constitute the author’s own judgement as of the date of the briefing and are subject to change without notice. Any rates given are “interbank” i.e. for amounts of £5million and thus are not indicative of rates offered by World First for smaller amounts. E&OE. Definitions of jargon/market terms can be found in our Glossary of Foreign Exchange Terms. Please click here if you would like to stop receiving the World First Morning Update.