Euro (€) Currency Thread

inspector_monkfish

1.0850 trading

TuftyMatt

Yesterday the poor performance of the banking sector was part blamed for the drop of the pound against the Euro.

Today the banking sector has a big rise and the good old pound continues it's decline against the Euro.

inspector_monkfish

TuftyMatt wrote: »

Yesterday the poor performance of the banking sector was part blamed for the drop of the pound against the Euro.

Today the banking sector has a big rise and the good old pound continues it's decline against the Euro.

MAD ISN'T IT
BUT TO BE FAIR, WE ARE NOW BACK TO WHERE WE STARTED THE DAY AT 1.0850

hazey31

Sorry I'm new to this thread and my understanding of economic affairs is rather small.

Maybe this is a 'how long is a piece of string' question but are there any ideas for how long the euro is expected to be strong against the pound? I've been tracking it fora few months and just before Christmas and it was 1 euro to a pound, over the last few months it fell a bit to about 1 euro to around 85 pence and has now creeped up again to over 90 pence. Is it at all possible to predict at the moment how long this will be sustained?

dealsearcher

hazey31 wrote: »

... are there any ideas for how long the euro is expected to be strong against the pound?

Is it at all possible to predict at the moment how long this will be sustained?

Tricky.

All the indicators at the moment are for the euro to weaken but the reality is somewhat different at the moment.

You can tell from the posts over the previous few pages of this thread that we can't understand how the euro is maintaining it's strength at this time.

inspector_monkfish

03:04 11Mar09 GBP - Pain Before Gain

(INT) GBP will remain weak in coming weeks but we feel there are medium term gains in store for Sterling. While there are risk factors, our core scenario is for a GBP rebound against USD over coming months as policy traction takes hold on financial market sentiment and UK economy.

The UK economy is in a dire situation currently and the hits just keep coming with today's January industrial production numbers showing the sharpest decline in production since 1981 -down 11.4 per cent. But that is to be expected in a time of crisis and recession. A significant amount of the bad news has, in our opinion, been already priced into the FX market. Since the beginning of the year, GBP has depreciated by nearly 22 per cent against the USD.

GBP has fallen from levels near 1.4120 against the USD yesterday, to 1.3840 currently. EURGBP breached key resistance levels (and the recent trend channel) on its meteoric rise to fresh six-week highs today. It is currently trading at 91.80 and the pair is now seen eyeing a multi-session move towards 0.9290/95 (Jan 29 high).

Option markets are no different from the physical FX markets, with clear
preference for both USD and EUR over the embattled GBP. Risk reversals for both GBPUSD and EURGBP have not spiked as much as physical moves though, as historical volatility plays catch-up to implied vols at the short-end of the curve. For GBPUSD, historical volatility has now outstripped implied volatility. In deed, across the risk reversal curve, the market is not pricing an appreciation of GBP. On the macro front, fiscal sustainability will be one of the dominant themes this year for many developed countries and the UK will not be left out. A focus on fiscal sustainability places a greater focus on domestic bond markets, and this issue is even more significant for FX when policy interest rates are close to the zero bound. Short-end interestdifferentials become less of a driver for FX, but sovereign risk issues will impact spreads further out on the yield curve.

GBP slumped by around 2.25 per cent yesterday (and has again been weak today) on the back of further indications of trouble in the UK banking sector. Lloyds Banking Group rescue by the UK government at the weekend has sparked a collapse in GBP to six-week lows. The UK government could end up with a 77 per cent stake in Lloyds in a worst-case scenario, in a similar deal to that struck between the government and RBS only weeks ago. The object of all this is to
boost confidence in the banking system and ensure that institutions are in a position to start lending properly again, as balance sheet restructuringmcontinues. But it comes at a huge (potential) price to the taxpayer in terms ofmheightened risk in the event of a sharper economic recession and losses inmasset values, whilst diluting the private shareholder. Even the UK's sovereignmdebt rating could be adversely affected, in the extreme. The UK's debt/GDPmratio could blow out substantially if the insured losses were realised. That
would be a worstcase scenario, and not at all positive for GBP. However, we feel it is only a risk scenario and as such is not our core view.

Coherent policy is a positive factor for the GBP in a very uncertain
environment, and the initiatives of UK policymakers have a consistency that ismlacking in other developed countries. However, the continued problems in the UKmbanking system is disconcerting for investors from a systemic standpoint and
will be a weight on GBP in the near-term. However, we feel that policy actionsm(bank bailouts, QE and MP) implemented by the government and the BoE willmeventually give a boost to GBP over the medium term. Associated with thembanking sector problems, the issue of normal lending levels is key to amrecovery in the housing market, as is the price of credit. Unlike in the US,mthe UK housing market rates are generally tied to short-end policy interestmrates. With policy interest rates close to zero, and expected to remain theremfor some time, it allows a greater degree of confidence by potential buyers inmhousing affordability. And the availability of credit is important formpotential homebuyers, so the encouragement of appropriate lending practices is
an important matter. Additionally, QE activity by the BoE will help keep bondmyields capped, through direct purchases of UK government debt. Lower long-termmyields are intended to help keep longer-term borrowing rates lower and thismreduces costs for businesses.

With more money supply (from QE), theoretically should put further near-termmpressure on GBP. However, the already sharp depreciation of the GBP over thempast 3-6 months has made UK assets relatively more attractive, and the bid inmGilts (especially from the BoE) may bring additional portfolio flows to the UK.mThese flows would be supportive of GBP and will be reinforcing of medium-term
GBP strength. This positive impact for GBP can only happen once the systemicmbanking concerns are removed in the medium term. Other adverse risk factorsmremain and to an extent are the worst-case scenario in the housing marketm(continued deterioration), the banking sector (further bank rescues required)mand in fiscal terms (a significant blowout in the UK's debt/GDP ratio). We expect GBP to move appreciate over the next six months toward 0.85 against EUR and to retrace to the mid 1.40's against USD. However, prior to the gain, we expect a little more pain, with EURGBP targeting around 0.93-0.95, with USDGBP
targeting levels around 1.35-1.36.

inspector_monkfish

07:22 11Mar09 German Jan PPI -1.2% On Month; +2.0% On Year

FRANKFURT--German producer prices in January declined more sharply than expected on the month, partially due to a new base-year calculation, the federal statistics office said Wednesday.

Prices at the factory gate fell 1.2% from December, which compares with forecasts for a slight drop of 0.1% in a Dow Jones Newswires survey of
economists.

On the year, producer prices were up 2%, below expectations for an increase of 3.4%.
Most of the annual increase was due to higher energy prices, the office said. When adjusted for energy-related items, the index rose merely 0.2% on the year, and was down 0.4% from December.

The office said it based January's forecast on 2005 as a base year. It had
previously used the year 2000.

inspector_monkfish

17:25 10Mar09 -PREVIEW-BoE to start pumping money into economy on Wed

LONDON, March 10 - Britain will officially start quantitative easing -- effectively printing money to help pull the economy out of recession -- on Wednesday with the Bank of England offering to buy 2 billion pounds of government bonds.
That will only be the first step in a 75 billion pound asset-buying programme unveiled by the central bank last week, an unprecedented attempt to breathe life into the economy as interest rates have fallen to a record low of 0.5 percent.
Analysts reckon the central bank will have little trouble finding sellers as it will be willing to pay any price for the bonds it wants to buy as its aim is to get money into the economy, not make a profit.
"Paying over the odds was clearly not a concern for them, and if that's the price they have to pay to get things moving, they are fully prepared to do so," said John Wraith, head of sterling rate strategy at RBC Capital Markets, in a note after a meeting with the BoE.
The BoE will purchase the securities via a reverse auction, which means sellers, rather than the buyer, determine the price, and it is relying on investors such as life assurance companies, pension funds and investment funds to part with their bonds.
It is hoping that by buying up the bonds, making yields fall sharply, they will make it cheaper for companies to borrow on the capital markets. Institutions that have sold gilts to the BoE, meanwhile, will have extra money to lend.

GETTING MONEY IN
The central bank is offering to buy six securities at Wednesday's reverse auction with maturities ranging from 5-9 years: the 5 percent 2014; 4.75 percent 2015; 8.0 percent 2015; 4.0 percent 2016; 8.75 pct 2017 and 5.0 percent 2018 papers.
Gilt prices have rocketed, sending yields to record lows since the BoE announced its quantitative easing programme on Thursday.
Five-year gilt yields have slipped around 35 basis points, the benchmark ten-year gilt shed more than 60 basis points, falling below 3 percent for the first time on record earlier this week and the yield on 20-year gilts has plunged 80 basis points since last Thursday.
Economists said turnout at the BoE's gilt buying operations was likely to be strong given the record 146 billion pounds of gilts issuance this year and the strong likelihood it would be even higher in 2009/10.
"The object for the BoE is to put money into the economy, so in that sense, all offers might be filled. They are not so focussed on price because it's not a money-making operation," said Moyeen Islam, strategist at Barclays Capital.
It will hold only one auction this week, but there will be two per week from next week on Mondays and Wednesdays.
The central bank will take non-competitive offers until 1200 GMT on auction days, announcing the amount it will allot to such offers at 1300 GMT.
It will then also publish the size open to competitive offers, and will take bids for that operation between 1415 and 1445 GMT. It will announce the results of that operation soon thereafter.
"I don't think there will be a problem getting a cover," said George Buckley, chief UK economist at Deutsche Bank.
"It doesn't matter if yields are low and prices are high. It just means the BoE can get money into the economy quickly without having to buy as many gilts."

inspector_monkfish

GB Trade balance figures released at 9.30am

markets getting nervous that they are going to be bad !! :eek:

inspector_monkfish

trading 1.0845