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Daily FX Report

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Analysts expect that the BoE cut rates to 4.75%

Mon, Oct 6 2008, 08:51 GMT
by Varengold Bank Research Team

Varengold Wertpapierhandelsbank AG

Good morning from wonderful Hamburg. Most of Japan institutional investors as well as life insurers, along with Japanese margin traders and foreign funds seem to sell yen heavily, while the currency pairs reached their record lows. Nevertheless we hope for a successful trading start in this week.

Market review

There won’t be any pressure on the BoE to cut rates from the British government. They are going to take big steps with economic policy to stem the credit crisis. Although analysts expect that the BoE cut rates to 4.75% from 5% at its monthly conference on Thursday, despite inflation running at more than twice the official target, because of fears about the economy.

The EUR/JPY falls as well as the AUD/JPY on the bleak outlook for Europe’s banking sector as European officials failed to come up with a comprehensive plan for the struggling sector and on capitulation in AUD long positions by Japanese retail margin traders composing the flare-up of risk aversion on tumbling stocks and the spreading credit crisis, some traders said. Nikkei Stock average falls 3.6% to a 4-year low while the EUR/JPY dips 3.3% to its 3-year low at 140.30. The AUD/JPY dips nearly 5% on the day to 0.7706, a level not seen since January 2005. The AUD/USD falls with 2.8% to a 2-year low of 0.7519.

There will be more injections by the New Zealand government as it feels the pinch from the global credit crunch and an economic recession. They hold a general election on November 8th and the update is required to ensure parties and voters know the state on finance.

USD/CHF

Since the beginning of August the USD/CHF has been trading in a horizontal trend channel with a resistance at 1.14 and a support level at 1.065. After touching the 1.065 level the market recovered and trades now close to the resistance line. If the market goes through this level we could assume further bullish movements.

GBP/USD

Since the middle of July the GBP/USD has traded in a bearish trend channel with a resistance at 1.857 and a support at 1.75. In the last 3 trading days the pair trades close to the support level. If the market breaks through the 1.75 support level we could expect a downward trend development.

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Published on  Mon, Oct 6 2008, 08:59 GMT