The pound has risen just above an eight week high against the Dollar today and is still resting very close to the 1.600 GBP/USD, we would expect some long positions to close out near this level of resistance. Clients with near term dollar needs could take full advantage of this rate, limit orders around 1.5950 GBP/USD have a good chance of being filled over the next 2 days.
The Euro has seen a surprising surge in value today. A tug of war is being fought against strong German economic figures and weak figures from most of the rest of Europe. There are wide spread protests wreaking havoc across the continent and the largest Irish bank is facing a bailout but the currency still remains strong.
The value of the pound has dropped to a 5 month low against the Euro today.
Further comments from the Bank of England show they are considering pumping more money into the economy because of perceived risks they might not do enough and undermine growth in the long term.
Posen has been causing ripples by saying he thought inflation would be lower than the target “pretty consistently over the next couple of years”.
“We should be doing more, based on my best assessment forecast now,” he was quoted referring to further monetary easing. “The risks are on the downside, not just for growth, but for the inflation target…It’s not that I’m worried about a double dip. “It’s not that I’m worried about another crisis, it’s more this long-term concern.”
His comments today are similar to those made earlier this weak when he said Britain should consider more monetary policy stimulus, or quantitative easing, to prevent the country falling into the same kind of slump that Japan did in the 1990s.
Posen’s dovish tone stands in stark contrast to his fellow board member Andrew Sentence’s Hawkish stance at previous meetings. Foreign currency markets are dominated by an obsession with the yield of a currency. Traders want to hold higher yielding currency in the long term, they also consider other elements like risk and economic growth but all things being equal they will go for yield all day long.
The Australian dollar looked set today to round off its best monthly performance in over a year despite running into light profit-taking after disappointing domestic data. The ‘Aussie’ is benefiting from its position as the second largest gold producer along with the higher yield advantage. Clients with Australian dollar money transfer needs are advised to get it over there and start earning the 5% average interest rates.
