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Market Review - 14/11/2007 22:07 GMT
British pound falls sharply on poorer U.K. growth outlook
The British pound declined by 1.6 percent from 2.0845 to 2.0505 yesterday after the Bank of England's quarterly inflation report implied that interest rates needed to to be cut next year in order to balance the risks to price growth. Central bank Governor Mervyn King was also quoted as saying that growth in the U.K. economy was likely to slow sharply in 2008. Euro rallied from 0.7043 to 0.7146 against sterling while gbp/jpy nose-dived from 232.40 to 228.05 as intra-day decline accelerated in part due to the triggering of technical stops.
The dollar fell against the euro and Swiss franc on better-than-expected eurozone GDP, which rose by 0.7% compared to a forecast of 0.6%. In addition, a report showed that U.S. producer prices increased less than expected in October while retail sales slowed slightly compared to the previous month. The U.S. data led to a late selloff in U.S. stocks due to concerns that the fallout from credit market crisis was affecting consumer spending ahead. The euro rose to 1.4726 (close to last week's record high at 1.4753) before slipping to 1.4650 whilst the Swiss franc strengthened to a marginal high of 1.1177 before retreating on cross unwinding in chf to 1.1252.
Dollar surged against the yen due to cross selling in the Japanese currency as an increase in risk appetite resulted in more accumulation of carry trades, where investors borrow yen against high-yielding currencies. Usd/jpy strengthened to 111.76 before easing to 111.32 while eur/jpy rallied to 164.31 before retreating to 163.09. The Australian dollar hit an intra-day high of 91.09 vs japanese yen before falling due to profit taking. The yen continued to weaken for the second straight day after Japan Prime Minister said in an interview with the Financial Times on Tuesday that the yen was rising too fast.
There was little reaction to the speech by Fed Chairman Bernanke who announced that the central bank would take steps to improve transparency, such as increasing the frequency of policy makers' economic forecasts to four times per year instead of two, with the horizon of the forecast expanded from two years to three. Interest rate futures showed a 72 percent chance that the Fed would cut rates by a quarter percentage point on December 11.
Economic data to be released on Thursday include German and eurozone consumer prices and U.K. retail sales. The U.S. will release consumer prices, Empire State manufacturing index, weekly jobless claims and the Philadelphia Fed survey.
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Market Review - 14/11/2007 22:07 GMT
British pound falls sharply on poorer U.K. growth outlook
The British pound declined by 1.6 percent from 2.0845 to 2.0505 yesterday after the Bank of England's quarterly inflation report implied that interest rates needed to to be cut next year in order to balance the risks to price growth. Central bank Governor Mervyn King was also quoted as saying that growth in the U.K. economy was likely to slow sharply in 2008. Euro rallied from 0.7043 to 0.7146 against sterling while gbp/jpy nose-dived from 232.40 to 228.05 as intra-day decline accelerated in part due to the triggering of technical stops.
The dollar fell against the euro and Swiss franc on better-than-expected eurozone GDP, which rose by 0.7% compared to a forecast of 0.6%. In addition, a report showed that U.S. producer prices increased less than expected in October while retail sales slowed slightly compared to the previous month. The U.S. data led to a late selloff in U.S. stocks due to concerns that the fallout from credit market crisis was affecting consumer spending ahead. The euro rose to 1.4726 (close to last week's record high at 1.4753) before slipping to 1.4650 whilst the Swiss franc strengthened to a marginal high of 1.1177 before retreating on cross unwinding in chf to 1.1252.
Dollar surged against the yen due to cross selling in the Japanese currency as an increase in risk appetite resulted in more accumulation of carry trades, where investors borrow yen against high-yielding currencies. Usd/jpy strengthened to 111.76 before easing to 111.32 while eur/jpy rallied to 164.31 before retreating to 163.09. The Australian dollar hit an intra-day high of 91.09 vs japanese yen before falling due to profit taking. The yen continued to weaken for the second straight day after Japan Prime Minister said in an interview with the Financial Times on Tuesday that the yen was rising too fast.
There was little reaction to the speech by Fed Chairman Bernanke who announced that the central bank would take steps to improve transparency, such as increasing the frequency of policy makers' economic forecasts to four times per year instead of two, with the horizon of the forecast expanded from two years to three. Interest rate futures showed a 72 percent chance that the Fed would cut rates by a quarter percentage point on December 11.
Economic data to be released on Thursday include German and eurozone consumer prices and U.K. retail sales. The U.S. will release consumer prices, Empire State manufacturing index, weekly jobless claims and the Philadelphia Fed survey.
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