British Pound Weakens on Uncertainties for Future Policy, Euro Extends Decline
Posted 04-06-2010 at 09:42 AM by DailyFX
Tags currency trading, dailyfx, euro, forex, gbp
The British Pound pared the previous day’s advance and slipped to a low of 1.5142 during the European session as the economic docket reinforced a mixed outlook for the U.K., and the currency is likely to maintain the narrow range carried over from the previous week as the Bank of England is scheduled announce its April rate decision on Thursday at 11:00 GMT.
Talking Points
• Japanese Yen: Mostly Higher Against the Majors
• Pound: PM Brown Sets General Election For May 6
• Euro: Poised to Test Lower Bounds of Recent Range
• U.S. Dollar: FOCM Meeting Minutes on Tap
British Pound Weakens on Uncertainties for Future Policy, Euro Extends Decline
Meanwhile, Prime Minister Gordon Brown publicized that the general election will be held on May 6 at his residence in London, which has led the BoE to push back next month’s policy meeting to May 10, and uncertainties surrounding the outcome of the vote could drag on the exchange rate as investors weigh the outlook for future policy.
Nevertheless, a report by the Bank of England showed housing equity withdrawals slipped GBP 4.0B in the fourth quarter after contracting a revised GBP 5.1B during the previous three-month period, which exceeded expectations for a GBP 3.0B decline as households continued to pay down their mortgage loans. At the same time, a report by Markit Economics and the Chartered Institute of Purchasing and Supply showed construction in the U.K. expanded for the first in two-years as the purchasing managers index increased to 53.1 in March from 48.5 in the previous month, and the BoE may hold an improved outlook for future growth as the economic recovery gathers momentum. Market participants expect the MPC to maintain its current policy this month as the central bank continues to see a risk for a protracted recovery, and Governor Mervyn King may continue to hold a dovish outlook for the region as he expects inflation to fall back below the 2% target later this year.
The Euro continued to trend lower against the greenback, with the exchange rate slipping to 1.3399 during the overnight trade, and the single-currency may continue to work its way towards the lower bounds of its recent range as the EUR/USD maintains the downward trend from the December high (1.5143) as the European Central Bank maintains a dovish outlook for future policy. Nevertheless, the Sentix investor confidence survey jumped to 2.5 in April from -7.5 in the previous month to mark the highest reading since June 2008, while the gauge for future expectations advanced to 12.5 from 4.5 in March. At the same time, a Bloomberg News survey shows all of the 62 economists polled forecast the ECB to hold borrowing costs at the record-low of 1.00% this month, while investors are pricing a zero percent for a rate hike according to Credit Suisse overnight index swaps, and the Governing Council is likely to hold a dovish policy stance going into the second-half of the year as it aims to support all of the economies operating under the single-currency.
The greenback was mixed against the major currencies, with the USD/JPY extending the previous day’s decline to reach a low of 93.77, and the dollar is likely to face increased volatility during the North American session as the FOMC is scheduled to release its March meeting minutes at 18:00 GMT. The Fed is likely to hold an improved outlook for future growth as the economic recovery gathers pace, but we will probably hear the central bank reinforce its pledge to hold borrowing costs near zero for an “extended period” of time as households continue to face the deterioration in the labor market paired with tightening credit conditions. At the same time, the central bank could see scope to normalize policy further over the coming months as growth prospects improve, and a shift in the Fed’s outlook would certainly spark increase volatility in the exchange rate as investors weigh the prospects for monetary policy going forward.
Do You Expect the EUR/USD to Maintain the Downward Trend from December? Join us in the Forum
Read more: DailyFX - British Pound Weakens on Uncertainties for Future Policy, Euro Extends Decline
Talking Points
• Japanese Yen: Mostly Higher Against the Majors
• Pound: PM Brown Sets General Election For May 6
• Euro: Poised to Test Lower Bounds of Recent Range
• U.S. Dollar: FOCM Meeting Minutes on Tap
British Pound Weakens on Uncertainties for Future Policy, Euro Extends Decline
Meanwhile, Prime Minister Gordon Brown publicized that the general election will be held on May 6 at his residence in London, which has led the BoE to push back next month’s policy meeting to May 10, and uncertainties surrounding the outcome of the vote could drag on the exchange rate as investors weigh the outlook for future policy.
Nevertheless, a report by the Bank of England showed housing equity withdrawals slipped GBP 4.0B in the fourth quarter after contracting a revised GBP 5.1B during the previous three-month period, which exceeded expectations for a GBP 3.0B decline as households continued to pay down their mortgage loans. At the same time, a report by Markit Economics and the Chartered Institute of Purchasing and Supply showed construction in the U.K. expanded for the first in two-years as the purchasing managers index increased to 53.1 in March from 48.5 in the previous month, and the BoE may hold an improved outlook for future growth as the economic recovery gathers momentum. Market participants expect the MPC to maintain its current policy this month as the central bank continues to see a risk for a protracted recovery, and Governor Mervyn King may continue to hold a dovish outlook for the region as he expects inflation to fall back below the 2% target later this year.
The Euro continued to trend lower against the greenback, with the exchange rate slipping to 1.3399 during the overnight trade, and the single-currency may continue to work its way towards the lower bounds of its recent range as the EUR/USD maintains the downward trend from the December high (1.5143) as the European Central Bank maintains a dovish outlook for future policy. Nevertheless, the Sentix investor confidence survey jumped to 2.5 in April from -7.5 in the previous month to mark the highest reading since June 2008, while the gauge for future expectations advanced to 12.5 from 4.5 in March. At the same time, a Bloomberg News survey shows all of the 62 economists polled forecast the ECB to hold borrowing costs at the record-low of 1.00% this month, while investors are pricing a zero percent for a rate hike according to Credit Suisse overnight index swaps, and the Governing Council is likely to hold a dovish policy stance going into the second-half of the year as it aims to support all of the economies operating under the single-currency.
The greenback was mixed against the major currencies, with the USD/JPY extending the previous day’s decline to reach a low of 93.77, and the dollar is likely to face increased volatility during the North American session as the FOMC is scheduled to release its March meeting minutes at 18:00 GMT. The Fed is likely to hold an improved outlook for future growth as the economic recovery gathers pace, but we will probably hear the central bank reinforce its pledge to hold borrowing costs near zero for an “extended period” of time as households continue to face the deterioration in the labor market paired with tightening credit conditions. At the same time, the central bank could see scope to normalize policy further over the coming months as growth prospects improve, and a shift in the Fed’s outlook would certainly spark increase volatility in the exchange rate as investors weigh the prospects for monetary policy going forward.
Do You Expect the EUR/USD to Maintain the Downward Trend from December? Join us in the Forum
Read more: DailyFX - British Pound Weakens on Uncertainties for Future Policy, Euro Extends Decline
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