Mike Paterson’s daily Forex brief
The last 24 hours has seen a rise in the US $ across the board exacerbated by Moody’s yesterday placing the UK on “negative watch” meaning a 30% chance of losing its AAA credit rating within 18 months. The ratings agency cites concerns over the impact of Eurozone fall-out on the UK’s growth prospects, which is hardly news to anyone but has now been said and the rating changed. Don’t know what took them so long frankly. France and Austria have also been warned and Italy, Spain and Portugal's ratings have been lowered.
The rally in the Euro and stock markets seen on Sunday night, after the Greeks voted through the necessary austerity package was already beginning to wane yesterday as I suggested it would, so the Moody’s announcement merely added more fuel to this slow burning fire. There was talk that the PSI (Private Sector Investment) part of the deal was under threat and this added to the general scepticism.
EURUSD had been holding around decent support lines at 1.3190 but then fell to lows of 1.3127 after the news before finding the usual sovereign buyers and has since rallied to 1.3193 before finding a few sellers. EURGBP has understandably been in crab-like mode given the Moody’s comments. EURAUD and EURJPY are both higher though as the USD buying forces USDJPY higher through 78.00 and AUDUSD lower through 1.0700.
GBPUSD fell quickly after the ratings news and we’ve been as low as 1.5686 before finding some support as traders start to rationalize the effect but overall the Pound has held up fairly well, no doubt something the UK coalition will be quick to seize upon this morning as they fend off the inevitable questions that Moody’s action will produce. George Osborne has been quick to deflect it onto the Eurozone as Moody’s did indeed cite, but it surely then highlights the UK’s current position in distancing itself from its largest trading area. If they go down, we go down. Can we really stand and gloat in the meantime?
Plenty of data to chew over and the UK inflation figures just out show CPI coming in at – 0.5% month on month and + 3.6% year on year which is much as expected.
Unlike the 3 away points snaffled by the mighty Shrimpers last night which some of you may well have witnessed in awe/disbelief on TV!
And finally, I’d like to say Happy 21st Birthday to my darling daughter Daisy for whom Valentine’s Day always has a more personal edge to it, and tonight we’re off to Theatreland to see our dear friend and former FX broker (yep, strange but true) Fred Ridgeway opposite James Corden in the sold-out production of One Man Two Guvnors.
Have a good day all, wherever your heart takes you.
Agree or disagree? Then please leave a comment in the box below or contact me by e-mail.