“You can’t conceive nor can I the appalling strangeness of the mercy of God” said Graham Greene. Some people must have similar feelings about the will of ratings agencies as Moody’s came out of nowhere with a bombshell for the US dollar.
The focus was the extension of Bush-era tax cuts; a stimulative measure carried on by the Obama administration in an attempt to reignite the consumer expenditure flame across the pond. It is obviously too early to tell whether it will work or not but one thing it will do is add to the US’s poor fiscal position.
Moody’s yesterday warned that the subsequent deterioration could lead to a downgrade in the US’s AAA credit rating. This sent the USD down to recent weak lows against most currencies, the pound excepted however.
Moody’s yesterday warned that the subsequent deterioration could lead to a downgrade in the US’s AAA credit rating. This sent the USD down to recent weak lows against most currencies, the pound excepted however.
The focus hasn’t drifted away from peripheral Europe in the meantime however as Silvio Berlusconi faces two votes of confidence, one from each of the houses of parliament. How they will go is anyone’s guess but a political upheaval would give euro bears another incentive to try and bash the single currency. The euro did kick upwards yesterday after the Moody’s news and as a result of the latest round of ECB peripheral debt buying that saw them purchase EUR2.7bn worth; a much larger figure than previous operations.
The pound came in for a bit of treatment yesterday after Charlie Bean, Deputy Governor of the Bank of England said in a press conference that the Bank could restart its asset purchase, or quantitative easing scheme, if growth starts to disappoint in the future. This I hope to readers of the Morning Update is an obvious statement and really didn’t necessitate the sterling movement we saw yesterday.
As we said yesterday, the focus will be on UK CPI and the FOMC later today. UK CPI is forecast to show 3.2% on a YoY figure and the monthly figure may shock higher on commodity price increases. That is due at 09.30.
| Indicative Rates | Sell | Buy |
| GBPEUR | 1.1789 | 1.1817 |
| GBPUSD | 1.5873 | 1.5897 |
| EURUSD | 1.3250 | 1.3243 |
| GBPJPY | 132.15 | 132.43 |
| GBPAUD | 1.5917 | 1.5940 |
| GBPNZD | 2.1063 | 2.1094 |
| GBPCAD | 1.5972 | 1.6000 |
| NZDUSD | 0.7527 | 0.7548 |
| GBPZAR | 10.80 | 10.85 |
| USDZAR | 6.8026 | 6.8324 |
| GBPPLN | 4.6941 | 4.7031 |
| EURJPY | 111.94 | 112.20 |
Rates are dependent on amount transacted.
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