Currency Market Updates

4, November 2009

Tomorrow the MPC will meet for their monthly meeting but this time around the implications are huge. The decision on whether to pump billions more into the economy or hold fire has caused widespread debate with increasingly confusing economic signals adding to the issue.

The problem for the MPC is that it does not want to not do enough especially with the prospect of unemployment pushing past the 3 million mark. Data released overnight showed that UK Nationwide Consumer Confidence remained unchanged from September. The pound has surprisingly rallied against the USD and EUR with a good day for equities helping to boost the risk on trade. The USD and JPY fell yesterday and the pound was a major beneficiary of this weakness.

Supporting sterling this morning is economic data that UK PMI for services was up to 56.9 from 55.3 in September. Another good number from the UK. Could sterling be building up for another fall? We will see tomorrow!

Tonight we have the interest rate decision from the US FOMC and the rates look almost certain to be kept on hold. The market will gauge the Fed’s tone regarding existing and possible future policy. In the past the Fed have continued to use the statement “for an extended period” in describing how long rates will remain at very low levels. If this phrase is removed or toned down then the USD should strengthen due to the potential of interest rate increases being more imminent. Also from the US we have ISM services today which will be a key number in monitoring the economic recovery.

In other news poor retail sales data from Australia undermined the AUD slightly as the rest of the commodity currencies gained. Retail Sales came in at minus 0.2% a surprise number especially as Australia have recently upgraded their outlook.

Report by Phil McHugh

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Compiled by Tom Nadir.

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