‘Extended Period' Extends Dollar losses

• Fed to keep rates low for ‘extended period’

• Conservative lead widens, sterling gains

• S&P reaffirm Greek debt at BBB

Sterling vs. the dollar has risen to a 2 week high overnight as traders were forced to cancel bets that the Fed would raise interest rates in the US sooner rather than later. The dollar lost ground also against the euro and other G7 currencies.

Ben Bernanke and the Fed maintained the line of keeping rates ‘exceptionally low’ for an ‘extended period’. Some traders had expected the committee to make some more hawkish noises as the pace of recovery in the US picks up but it wasn’t to be.

As a result GBP/USD hit a high of 1.5267 while EUR/USD peaked at 1.3815

Sterling had a good day on its own yesterday as an independent poll showed a Conservative party lead re-emerging. The market is still fearful of a hung parliament and will continue to be until we go to the polls so volatility in all sterling crosses are assured as we head towards May 6th.

The euro too had a good day as the ratings agency Standard & Poors gave a Greece a boost as it re-affirmed their BBB credit rating. As a result the yield on Greek debt fell as did the price of insuring the debt against default. There was some disappointed noises however as there was no specific pledge of aid to Greece from the remaining members of the EU. Papandreou said it was “a step forward, but it’s not enough”. The cost of Greek debt is still high and still needs to be reduced for Greece to be able to fund it.

Today is full of UK data. Firstly we have the minutes from the Bank of England’s latest meeting. This should be a unanimous vote for holds on both the interest rate and QE; any deviance from this may see sterling fall off. We also have UK unemployment data at 09.30.

This is my last update for a week and Rick will be taking over in my stead.

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