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Monday April 21, 2008 - 10:34:44 GMT
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Forex Research - Pound Falters, As RBS Rights Issue And BoE Bail Out Raises Concerns
The Pound broke the 2.000 price level during the Asian trading
session, despite Rightmove reporting a decline of 0.1% in house prices
due to a lack of credit.
Talking Points
• Australian Dollar: Producer Prices Rise by Record Amount
• Japanese Yen: Service Sector Weakens On Consumer Spending
• Euro: Settles Above 1.5800
• Pound: Fails To Remain Above 2.000 Despite BoE Bailout Plan
• US Dollar: No data on tap
The
Pound broke the 2.000 price level during the Asian trading session,
despite Rightmove reporting a decline of 0.1% in house prices due to a
lack of credit. Sterling Bulls shrugged off the news as details emerged
that the BoE plans to swap 50 billion pounds of government bonds for
mortgage backed securities. However, the cable’s momentum was thwarted
by the confirmation that RBS was considering a rights issue expected to
raise £10 billion. The move was necessitated by Britain’s second
largest bank’s tier 1 ratio falling significantly below the European
average. The news in combination with the bailout plan spooked traders
and raised concerns regarding the extent of the credit crisis, which
saw the Pound falter below 1.9850.
The USDJPY has come under
pressure on profit taking pushing the pair towards 103.50, after
reaching as high as 104.67 last week on increased risk appetite. The
Yen is finding support despite a decline in the Tertiary index of 1.7%
in February. The gauge which measures household spending on services
fell as rising inflation has reduced consumer purchasing power and
weighed on their confidence. However, risk appetite remains strong and
may see the pair find support at these levels.
Since falling
as low as 1.5710 on Friday, the Euro has managed to climb back above
1.5850, despite the lack of any fundamental data. The expected increase
in interest rate differential is providing support for the pair, with a
25 point cut anticipated at the next Fed meeting on April 30th.
However, the recent hawkish rhetoric that has been coming from FOMC
members Yellen, Fisher and Plosser has increased speculation that the
central bank may end their current easing policy, which may spell an
end to the Euro’s record run.
The EUR/USD may remain
directionless over the next 48 hours as there isn’t any European or U.S
data until tomorrow’s U.S. existing home sales. However, if momentum
swings back towards the Dollar, 1.60 may be an insurmountable barrier.
EURUSD 1.60 or 1.50? Join us in EURUSD Forum
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