Aussie interest rates lower

Today's Highlights

Sterling volatile in light market ahead of election

Aussie interest rates lower

FX Market Overview

Welcome to the world Princess Charlotte Elizabeth Diana Cambridge. Good luck with the heavy burden of a 'People's Princess' moniker. No one deserves that pressure.

I hope you all had a great weekend and are back in the groove, raring to go. Better still ...it is election week in the UK. Yay! That is either exciting because we will get to see which bunch of politicians will run or ruin the country over the next 5 years or because all the campaigning nonsense and posturing with finally be over.....or not of course.

Whatever the outcome, the Pound is likely to be subdued this week. I read a number of newspapers pointing to the volatility on Friday and Monday and citing the election as the reason. Wrong. The lack of Asian and European traders on Friday added to the lack o0f UIK traders on Monday to create very illiquid trading conditions and that inevitably leads to volatility.

Sterling slipped last week after the economic growth data was poorer than expected but it was only the first estimate and the Pound has bounced back this morning after UK traders returned to their desks. Other than the election, there isn't a lot for Sterling traders to work with this week. We do get producer price indices today and both the service sector PMI and the trade balance later in the week but neither is likely to shift the markets.

We heard overnight that the Reserve Bank of Australia did as so many analysts had predicted and cut their base rate from 2.25% to just 2.0%. What's more, Governor Glenn Stevens hinted at further cuts to come. With the base rate already at a record low, we ought to see some flight from the Australian Dollar from investors but that clearly hasn't happened as yet. The widely forecast interest rate cut very evidently didn't surprise anyone but I would suggest the GBP-AUD exchange rate is unlikely to stay around A$1.92 for long.

We haven't seen the German rail strike damage the euro yet but it will cause all manner of trouble for German businesses and the public alike. The Sterling - Euro rate has risen a tad and the Euro-US Dollar rate has slipped in similar fashion but that is probably more to do with profit taking and a correction of the euro's bounce in the latter part of last week.

We will get a raft of employment and earnings data from New Zealand tonight and that is likely to reflect the worrying slowdown in the NZ economy. That is something that is troubling the Reserve Bank of New Zealand. Whether they will be concerned enough to react by lowering borrowing costs is open to debate. Meanwhile, the NZ dollar is relatively static.

The week ends with the UK election results; probably the start of coalition haggling and from across the Atlantic, we will see the US employment report. That doesn't carry the weight it used to but it could be another poor set of data for the US economy. That has been a worrying trend of late for the US authorities and ought to prolong the wait for the first US interest rate hike. It could even weaken the USD in the short term.

And police in Huddersfield are seeking the owner of a severed ear that was found on the street after a violent altercation. The ear, complete with diamond stud earring, has not yet been claimed. Maybe the owner hasn't heard the police appeals. It does bring to mind the joke though.
"Sir, is this yours?".
"No thanks, I've got one 'ere"