Euro loses ground as safe haven currencies are flavour of the week. FX market reportBy james tweed • Mar 6th, 2012 • Category: Currency
Significant items this week:
Tues 6th March UK – Feb retail sales
Wed 7th March EU – German Industrial production
Thurs 8th March UK – BOE MPC interest rate meeting
EU – ECB Interest rate meeting
Fri 9th March UK – Trade Balance, Manufacturing output
EU – German trade Balance, CPI
US – Non-farm payrolls
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The Euro lost ground last week as weaker than expected US and European economic data dampened risk appetites and boosted safe haven currencies. Reports of a delay in the approval of more than half the Euro 130 billion bail out for Greece pending proof from Athens that it would implement agreed spending cuts and reforms didn’t help the Euro either. German retail sales were worse than expected and unemployment across the EU is now running at 10.7%. The ECB pumped another tranche of cash into the banking sector – Euro 530 billion to be precise, in the form of loans to 800 banks to ensure they remain in funds and solvent. Further concerns were also raised within the EU when Ireland announced that they would hold a referendum on the Eurozone’s fiscal pact and whether their people were willing to accept the measures being imposed on them.
Meanwhile, the US Dollar gained support after Ben Bernanke lowered the expectations of another round of Quantitive Easing in the US. US pending home sales also impressed on the upside, showing 2% growth in Janury. But all is not rosy in Dollar land – US durable goods orders slumped 4% last month and that’s the most it has fallen in 3 years. This is, however, at odds with US consumer confidence figures which are the highest they have been for a year. US GDP has been annualised at 3% in Q4, but it is all looking a little fragile as the world deals with increased oil prices.
Sterling has had a mixed week, losing out to the US Dollar but gaining against the Euro, as an industry survey showed UK construction was growing at its fastest levels since March 2011. Most of the movements have not been as a result of UK data but more the reaction to EU and US data. There is a meeting of the MPC at the Bank of England this week, as well as one at the ECB – no interest rate cuts are expected, we expect that all the news will be about the Euro and Greece. The big question is will the private sector bond holders agree to their haircut?