Falling stock prices caused trouble on Wall St and put pressure on the dollar during yesterday’s trading. As always this meant the euro got the better of the day’s exchanges, but EURUSD gains were limited. The pair rose to up above 1.57 but failed to push on further after EU GDP came in lower than expected. Trichet, the ECB president, continued to make hawkish noises as he addressed the EU Parliament, claiming that higher food and energy prices were beginning to creep into the broader economy. We expect the euro to remain supported against the dollar and the pound in the with expectations of another hike to come later in the year.

 The Bank of England will emerge from their policy meeting with their hands as tied as when they went in. This is because of the stagflationary pressures that are facing the UK. Rising inflation requires a rate hike but the slowing economy would benefit from a cut. In the end, the members are likely to opt for a wait-and-see approach in the hopes that primary inflationary pressures in food and energy will dissipate without feeding into the wider economy. The majority view is a “no change” outcome at midday.

UK housing data continues to disappoint. Halifax prices fell to -6.1% 3m/y vs. -5.9% expected.

Sterling has slipped against the commodity currencies as Kiwi, Aussie, Rand and the Canadian dollar all rallied over the last two days.   

———————-

 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.   

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.