FX Market Overview

Monday was a rather subdued affair with very little data to set traders’ pulses racing. The languid markets were characterised by a gentle slide in the value of the Pound. That wasn’t changed by the rather upbeat report from the British Retail Consortium but Sterling’s decline could only be hastened by the Royal Institute for Chartered Surveyors report which showed at price balance of 17 versus the market forecast of 30. This is the balance between the percentages of RICS members who see house prices rising compared to those who see a fall. The figure is still in the positive but it is yet another frustrating delay in any economic pickup. And to add to Sterling’s woes, Moody’s and Fitch, two of the three major credit ratings agencies have been offering rather negative news overnight on their view of the UK economy.
No wonder then the Pound is slipping back below USD 1.50 although $1.49 and $ 1.4820 should provide some support for the battered Pound. Sterling is trying to break below EUR 1.10 although it has done this before and managed to end each day back above that line. The Pound has tested the recent lows seen against the New Zealand Dollar but against the Australian Dollar, Sterling hit yet another 25 year low overnight and looks set to test A$ 1.60 in the days ahead; especially if the comments of the Deputy Governor of the Reserve Bank of Australia are positive tonight. Against the Canadian Dollar, Sterling also made a fresh 25 year low overnight and looks destined to reach C$ 1.52 where it found support in 1976 if not the C$ 1.46 low of February 1985.
I think it is fair to say the picture for Sterling is not a rosy one but there are good news stories around the markets. China has been offering its view of its reserve planning. There has been a long standing feeling that China would ease away from holding quite such a large proportion of its reserves in US Treasury Certificates but that doesn’t feature in the words on the deputy governor of the Peoples Bank of China, Yi Gang. In fact he sees the Chinese holdings of US treasuries as beneficial to both parties and he sees the US Treasury market as a key feature of Chinese reserve investments. US Dollar strength in this morning’s trade is no surprise.
On the Greece story, comments from French President Sarkozy, or Mr Carla Bruni as he is better known, that the EU would help Greece if their problems worsened may have been timed to coincide with the Greek Prime Minister’s meeting with President Obama or may have been just a fluke that he spoke when he did. It’s hard to say, but the effect has been quite positive on the Euro and news that the EU is considering an EU monetary Fund to rival the International Monetary Fund may also have calmed nerves and allayed fears of further Greek contagion across the EU region.
Today’s data diary is just as light as yesterday’s and another day of gentle trending is likely. Sadly the gentle trend for the Pound is a gentle slide southward. Consequently, anyone with Sterling to sell is seeing their wealth diminish by the hour. Early covering against risk may well be the most palatable option.

So have a great Tuesday, enjoy the glimmers of sunshine across the UK. Although, if you are one who believes in ghosts, I am sorry to say you missed a fantastic opportunity over the last few days. In New Zealand, two glass vials said to contain the ghosts of two dead people were sold at auction for NZD 2,830 (£1,320 approx). The seller, Avie Woodbury, said she caught them in her house and stored them in bottles with stoppers after dipping the vials in holy water. Apparently that "dulls the spirits' energy", which coincidentally, is exactly what my dad says when you offer him water with his whiskey. Now that’s spooky.