Lightning McQueen
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Hi Chris
First of all let me start off by saying that I know absolutely zero about forex so would like to ask what instrument are these charts actually charting :?:
The reason I am asking is that the first 2 charts date ranges to me appear to coincide with economic slumps so would obviously like to continue to watch the third chart.
cheers
Don
First of all let me start off by saying that I know absolutely zero about forex so would like to ask what instrument are these charts actually charting :?:
The reason I am asking is that the first 2 charts date ranges to me appear to coincide with economic slumps so would obviously like to continue to watch the third chart.
cheers
Don
wasp
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Sterling heading for $2 barrier
The shock rise in UK interest rates last week has sent the pound jumping higher against the dollar and other currencies, a trend that may continue. Sterling rose more than two cents to $1.91 on Friday, a 15-month high.
Analysts think the pound could near the two-dollar mark in coming months as investors pile into the currency.
They expect the Bank of England to raise rates even further from their current 4.75%, presenting a good yield for those buying into the pound.
Sterling has also risen against the euro and the yen, helped by the fact that UK interest rates are higher than those in Japan and the European Union.
Bad for exporters
A high value pound has mixed implications for UK businesses and consumers.
We are revising our forecasts up, and do see the possibility of the pound hitting $2
Simon Derrick, Bank of New York
It makes UK exports more expensive on overseas markets, but it means companies buying raw materials in from abroad can get more for their money.
It also means that some imported items are cheaper in the shops, which is good news for consumers.
This can help keep a lid on the overall level of rising prices, known as inflation.
However a strong pound is bad for the UK trade deficit, which hit a higher than expected £6.8bn ($12.4bn) in May as the country imported much more than it exported.
At the same time as the pound is becoming more attractive to currency traders, the dollar is losing its appeal - partly because the US Federal Reserve is expected to pause its cycle of raising interest rates.
The central bank's federal open market committee (FOMC) meets on Tuesday, to decide on whether to continue its series of 17 consecutive hikes, which have left the country's benchmark interest rate at 5.25%.
Currency traders have been switching their reserves out of the dollar in the belief that the Fed may hold steady, or if it does raise rates again, signal that it will stop there.
Weakening dollar
It is this divergence in monetary policy cycles - rates heading higher in the UK while looking set for a pause in the US - that economists believe will give the pound more upward momentum in the weeks ahead.
"We are revising our forecasts up, and do see the possibility of the pound hitting $2," said Simon Derrick, chief currency strategist at the Bank of New York.
Sterling last reached the $2 mark in September 1992, just before the "Black Wednesday" crisis, when currency speculators forced the UK government to withdraw the pound from the European Exchange Rate Mechanism.
If the pound does pass the $2 mark, currency experts believe it will be a reflection of the dollar's weakness across the globe.
China has gigantic reserves of foreign currency, much of which is held in dollars.
"Since April there has been more and more comment from Chinese central bank officials about the composition of their reserves," said Mr Derrick.
"There is a definite feeling that they are uncomfortable with their weighting of dollars."
If the Chinese central bank starts selling noticeable amounts of its dollar reserves, it would weaken the dollar even more in the eyes of currency markets.
There are signs that other central banks are seeing sterling as a more attractive option, with the Bank of Italy announcing recently that it had slashed its dollar holdings and moved a quarter of its foreign reserves into the pound.
Story from BBC NEWS:
The shock rise in UK interest rates last week has sent the pound jumping higher against the dollar and other currencies, a trend that may continue. Sterling rose more than two cents to $1.91 on Friday, a 15-month high.
Analysts think the pound could near the two-dollar mark in coming months as investors pile into the currency.
They expect the Bank of England to raise rates even further from their current 4.75%, presenting a good yield for those buying into the pound.
Sterling has also risen against the euro and the yen, helped by the fact that UK interest rates are higher than those in Japan and the European Union.
Bad for exporters
A high value pound has mixed implications for UK businesses and consumers.
We are revising our forecasts up, and do see the possibility of the pound hitting $2
Simon Derrick, Bank of New York
It makes UK exports more expensive on overseas markets, but it means companies buying raw materials in from abroad can get more for their money.
It also means that some imported items are cheaper in the shops, which is good news for consumers.
This can help keep a lid on the overall level of rising prices, known as inflation.
However a strong pound is bad for the UK trade deficit, which hit a higher than expected £6.8bn ($12.4bn) in May as the country imported much more than it exported.
At the same time as the pound is becoming more attractive to currency traders, the dollar is losing its appeal - partly because the US Federal Reserve is expected to pause its cycle of raising interest rates.
The central bank's federal open market committee (FOMC) meets on Tuesday, to decide on whether to continue its series of 17 consecutive hikes, which have left the country's benchmark interest rate at 5.25%.
Currency traders have been switching their reserves out of the dollar in the belief that the Fed may hold steady, or if it does raise rates again, signal that it will stop there.
Weakening dollar
It is this divergence in monetary policy cycles - rates heading higher in the UK while looking set for a pause in the US - that economists believe will give the pound more upward momentum in the weeks ahead.
"We are revising our forecasts up, and do see the possibility of the pound hitting $2," said Simon Derrick, chief currency strategist at the Bank of New York.
Sterling last reached the $2 mark in September 1992, just before the "Black Wednesday" crisis, when currency speculators forced the UK government to withdraw the pound from the European Exchange Rate Mechanism.
If the pound does pass the $2 mark, currency experts believe it will be a reflection of the dollar's weakness across the globe.
China has gigantic reserves of foreign currency, much of which is held in dollars.
"Since April there has been more and more comment from Chinese central bank officials about the composition of their reserves," said Mr Derrick.
"There is a definite feeling that they are uncomfortable with their weighting of dollars."
If the Chinese central bank starts selling noticeable amounts of its dollar reserves, it would weaken the dollar even more in the eyes of currency markets.
There are signs that other central banks are seeing sterling as a more attractive option, with the Bank of Italy announcing recently that it had slashed its dollar holdings and moved a quarter of its foreign reserves into the pound.
Story from BBC NEWS:
wasp
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NEW YORK, Aug 4 (Reuters) - The dollar fell to a two-month low against the euro on Friday after U.S. government data showed the economy created fewer jobs than expected in July, suggesting the Federal Reserve could pause in its rate-raising campaign at its meeting next week.
The euro rose to a two month-high around $1.2880 against the dollar soon after the U.S. employment report from about $1.2800 shortly prior. The dollar fell 0.4 percent against the yen to 114.55 yen from about 115.35 yen before the data's release.
The employment report was the last major piece of economic data before the U.S. central bank's Federal Open Market Committee meets on Aug. 8 to decide whether to continue its two-year-long series of quarter-percentage point rate rises.
The Labor Department report showed U.S. employers added 113,000 new jobs last month, while the unemployment rate jumped unexpectedly to 4.8 percent. For details, see [ID:nN03282211]. Wall Street economists were forecasting new jobs of 142,000.
"This number supports the idea of a Fed pause," said Richard Franulovich, senior currency strategist at Westpac Banking Corp. in New York.
"It seems that interest rate support for the dollar is fading and this number no doubt is negative for the dollar."
After the report, federal fund futures were pricing in a less than 20 percent chance the Fed will hike rates on Aug. 8, down from about 43 percent before the data. Higher interest rates generally enhance the allure of short-term dollar deposits.
Analysts said investors continue to focus on slowing growth -- a factor the market and officials already agree on -- but that the issue is whether inflation has reached a peak. This, they say, does not seem to be evident at this point.
In Canada, the country's employment report on Friday showed fewer jobs created than forecast, which analysts said was another sign of weakness that supported the Bank of Canada's decision to not raise interest rates at its July meeting. As a result, the Canadian dollar fell, pushing the greenback up 0.5 percent at C$1.1316.
NEWS STORY - Reuters.
The euro rose to a two month-high around $1.2880 against the dollar soon after the U.S. employment report from about $1.2800 shortly prior. The dollar fell 0.4 percent against the yen to 114.55 yen from about 115.35 yen before the data's release.
The employment report was the last major piece of economic data before the U.S. central bank's Federal Open Market Committee meets on Aug. 8 to decide whether to continue its two-year-long series of quarter-percentage point rate rises.
The Labor Department report showed U.S. employers added 113,000 new jobs last month, while the unemployment rate jumped unexpectedly to 4.8 percent. For details, see [ID:nN03282211]. Wall Street economists were forecasting new jobs of 142,000.
"This number supports the idea of a Fed pause," said Richard Franulovich, senior currency strategist at Westpac Banking Corp. in New York.
"It seems that interest rate support for the dollar is fading and this number no doubt is negative for the dollar."
After the report, federal fund futures were pricing in a less than 20 percent chance the Fed will hike rates on Aug. 8, down from about 43 percent before the data. Higher interest rates generally enhance the allure of short-term dollar deposits.
Analysts said investors continue to focus on slowing growth -- a factor the market and officials already agree on -- but that the issue is whether inflation has reached a peak. This, they say, does not seem to be evident at this point.
In Canada, the country's employment report on Friday showed fewer jobs created than forecast, which analysts said was another sign of weakness that supported the Bank of Canada's decision to not raise interest rates at its July meeting. As a result, the Canadian dollar fell, pushing the greenback up 0.5 percent at C$1.1316.
NEWS STORY - Reuters.
