US ($) Currency Thread 2

MikeKBRFX

The rate has just broken 1.6300, poor US Existing Home Sales data a major contributing factor; the headline figure reporting well below economist's estimates.

inspector_monkfish

18:40 21Mar11 - Pound's Outlook Uncertain In Key Week For UK Data

-- Domestic issues back in the spotlight in volatile week for sterling
-- February inflation data, BOE minutes and the budget are all due
-- Strategists divided as strong inflation balanced by austerity measures
-- Budget largely expected to be a non-event for the pound

LONDON--A decisive few days lie ahead for the pound, with inflationary pressures, monetary policy and fiscal austerity all thrown back into the limelight by a raft of heavy-hitting data releases and the set-piece annual budget Wednesday.

Sterling has been stuck in the range of $1.60 to $1.63 against the dollar since early February with the market unable to push the pound decisively one way or the other. Strong inflation data and the hawkish rhetoric from certain Bank of England members have been a solid support while any gains have been capped by looming austerity measures, which are expected to eat into household disposable incomes and weigh on consumption.

This week's rush of key data releases comes as currency strategists are sharply divided on the future direction of the pound. While this is expected to be a volatile week, strategists don't believe that the pound will be able to break higher or lower.

But at some point the market will have to decide whether the U.K. can handle a combination of higher interest rates and sweeping government cuts. Alternatively, will households struggle under the weight of falling real wages and higher taxes?

"A tighter fiscal/monetary policy mix should be supportive for the currency, in theory. In practice, sterling's performance will be a function of whether the economy can take it and more importantly, whether the market believes that the economy can take it," said Audrey Childe-Freeman, head of currency strategy for Europe, Middle East and Africa at JP Morgan Private Bank in London.
Some currency strategists such as Paul Mackel at HSBC in London feel that U.K. households will buckle under the pressure. "If the Bank of England raises rates this year, then this should be a bad thing for the currency because we don't think households can stomach it," he said.

"I don't think there are compelling reasons to buy sterling, I'm not convinced that its strength is going to be sustained," he added.

But upward price pressures and the anticipation of a rise in interest rates are keeping sterling well supported. Inflation data for February are expected to show this trend continuing. On average, economists expect annual CPI inflation to accelerate to 4.3% in February from 4.0% while the retail price index is forecast to surge to an annualized rate of 5.3%.

Barclays Capital's Sara Yates and David Forrester recommend starting the week positive on sterling against the dollar ahead of the inflation release before switching to a negative bet before the Monetary Policy Committee minutes are issued Wednesday in anticipation of a less hawkish release.

"It is [the minutes'] tone rather than the votes that will matter most for sterling. And following [Deputy Governor Charles] Bean's somewhat more dovish 'wait and see' comments last week, we think there is a risk that the minutes will be more dovish than investors expect," they said.

While the budget would normally take center stage for the markets, the inflation data and the minutes will overshadow Wednesday's spending plan, which isn't expected to reveal much. The likely downward revision in growth has long been anticipated by the market and it would take a significant deviation from the fiscal-consolidation path to move sterling sharply during the unveiling of the budget.

inspector_monkfish

11:14 22Mar11 RTRS-Sterling rallies to fresh 14-mth high on CPI data

* Sterling jumps vs dollar after CPI data
* UK CPI surges to 28-month high of 4.3 pct
* Markets await BOE minutes, UK Budget plans on Wednesday

LONDON, March 22 - Sterling extended gains on Tuesday, hitting a fresh 14-month high against a broadly weaker dollar after stronger-than-expected UK inflation prompted investors to bring forward rate hike expectations.

Traders and analysts said more gains could be in store and sterling could rise to as far as $1.65 if minutes of the Bank of England's last meeting, due out on Wednesday, show a more hawkish bias by policymakers.

Investors have now moved to almost fully pricing a quarter percentage point rate hike for July, having fully factored in one in August just before the inflation data was released.

"Sterling has the most to gain if BoE tightening expectations are repriced because it was hit the most following events in Japan and the Middle East," said Chris Turner, head of FX strategy at ING.

"Cable has already come up 3 cents in three sessions. It has conviction to go higher and could hit $1.65. We will see further gentle sterling gains in coming weeks," he said.
Sterling was up 0.5 percent to $1.6384 <GBP=D4>, its highest since Jan. 19, 2010, having convincingly broken past resistance at $1.6350 -- a key level the pair has been unable to advance past in over a year.

The Office for National Statistics said consumer price inflation for February jumped to 4.4 percent, from 4.0 percent in January. Reuters analysts had forecast a rise to 4.2 percent which was already more than double the Bank of England's target of 2.0 percent.

CMC Markets said in a note that the higher inflation numbers raised the likelihood of a strong move higher for the pair, adding that the break above $1.6350 meant cable was on target to test its 2010 high of $1.6459.

The pound also rose against the euro, with the common currency shedding nearly 0.4 percent to 86.85 pence <EURGBP=D4>. With investors repricing the chances of rate increases by the BoE, the euro retreated from its four-and-a-half month high of 87.59 pence.

The euro has support above its daily cloud and 100-week moving average around 86.74 pence. On the other hand, technical analysts said a break above Friday's high could see it target the 2010 high of 89.40 pence, but stiff resistance was seen ahead of 90 pence.

Many in the market believe the BoE will raise rates in coming months from a record low 0.5 percent but will lag the European Central Bank, which has signalled it could raise rates next month. That is likely to limit gains by the pound against the euro.

Some analysts had pushed back their forecasts for rate hikes following some recent weaker UK data and on uncertainties about the impact of events in Japan, as well as in North Africa and the Middle East.

"Although the pound may break higher initially on the back of strong inflation figures, gains above $1.6400 may be fleeting," said Kathleen Brooks, research director at Forex.com.

"We need to hear more from the Bank about how close they are to hiking rates first, which can't be deduced from just looking at CPI alone."

Investors will also await the UK government's 2011 Budget, due to be unveiled on Wednesday, which will seek to bolster faltering growth without compromising on a tough austerity programme put in place to get public finances in order.

KevinM

Was going to order some $US from one of the companies (online) in the Travel Money maximiser list on here, but they want me to send them photocpies of my driving license, utility bill and bank statement.

Is this normal? I don't feel comfortable parting with such a level of detail to an online company that I have never used before.

Can anyone advise me the best place to get £4500 worth of $US without jumping through hoops and sending my life history to them. Looking for at least a rate of 1.62

Thanks,
Kevin.

dzug1

KevinM wrote: »

Was going to order some $US from one of the companies (online) in the Travel Money maximiser list on here, but they want me to send them photocpies of my driving license, utility bill and bank statement.

Is this normal? I don't feel comfortable parting with such a level of detail to an online company that I have never used before.

Can anyone advise me the best place to get £4500 worth of $US without jumping through hoops and sending my life history to them. Looking for at least a rate of 1.62

Thanks,
Kevin.

For that sort of amount you are going to have to jump through money laundering hoops of the sort you describe (or similar - the details may vary) wherever you get it. Your own bank is the only (probable) exception.

jen_br

Split it into 1000's over 500 -1000 you get a better rate.

happy4mike

I just ordered some dollars but now they've arrived I see they've given me 7 $100 dollars notes which is useless as Im going to a developing country! Does anyone know anywhere that will break them down into smaller notes for me for free?

Thanks

Voyager2002

happy4mike wrote: »

I just ordered some dollars but now they've arrived I see they've given me 7 $100 dollars notes which is useless as Im going to a developing country! Does anyone know anywhere that will break them down into smaller notes for me for free?

Thanks

I had this experience, and went to my local Marks and Spencer. They were very helpful, but do make a point of being polite since they are doing this as a favour to you rather than as part of their business.

dazbowski

Hi, I'm going to America on the 8th May and am a litttle worried that the exchange rate will keep falling.

I don't have the money to get my Dollars untill Friday, should I use my overdraft and be charged a bit or wait till Friday to get them?

Is there any idication if they'll rise or fall before then?

Thanks

bb69

dazbowski wrote: »

Hi, I'm going to America on the 8th May and am a litttle worried that the exchange rate will keep falling.

I don't have the money to get my Dollars untill Friday, should I use my overdraft and be charged a bit or wait till Friday to get them?

Is there any idication if they'll rise or fall before then?

Thanks

Hi there!
Gosh it doesnt look good today does it?

I am off in a couple of weeks... I wish i'd bought more last week when the rate was great!!

Not sure what to say about the overdraft the $ it has fluctuated a bit over the last few weeks though..