Monday, 12 September 2011

Worst Week for Sterling in Nine Months

Great Britain book published this week the biggest weekly fall against the U.S. dollar nine months of speculation that the fragile UK economy will force the central bank to keep interest rates at historic low.

Virtually all the key data this week was negative for the pound. Whether house prices, industrial production or the producer price index, all the signal indicators on the worsening state of the British economy. Not surprisingly, the Bank of England kept its policy very stimulating, but also reinforces the pessimistic view on the future of the UK economy and currency.

The pound was in decline against the dollar and the yen for almost a week and will publish the third consecutive weekly decline. The currency also weakened against the euro in the first half of the week, but strongly advanced in the second half as concern for the problems of the European Union intensified.

GBP/USD dropped from 1.6150 to 1.5878 over the week. GBP/JPY slipped from 124.20 to close at 123.20. EUR/GBP fell from 0.8765 to 0.8598, the lowest level since March, after it rose to 0.8842 earlier this week.
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Franc Considered Overvalued Even Pegged to Euro

The Swiss franc fell against other major currencies today as the Finance Minister Johann Schneider-Ammann said the currency is "vastly overrated" even after the central bank set the franc to the euro. The franc rose against the euro today.

The minister explained that he believes that the fair rate for the franc is the following:

There is a general understanding that the purchasing power parity is around 1.35 to 1.40 francs per euro. That's more or less accepted. 

According to the index of the Organization for Economic Cooperation and Development, the Swiss currency is still 35 percent above the right price against the euro.

The euro fell today on concerns about the debt crisis in the region, but the parity of the franc to the euro has not allowed the Swiss franc to benefit from the resulting demand for shelter. However, the Swiss currency rose against the euro, reaching the limits set by the Swiss National Bank.

USD/CHF closed today at 0.8835 after opening at 0.8754 and falling to 0.8706. CHF/JPY fell from 88.49 to 87.75. EUR/CHF closed at 1.2065, declining from the opening rate of 1.2151.
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Canadian Dollar Falls with Employment

The Canadian dollar for a second day today against its U.S. counterpart and the Japanese yen, towards parity with the dollar after the report showed that employment in Canada fell and unemployment rate unexpectedly rose last month. The currency managed to gain against the euro.

Statistics Canada reported today that the number of employed persons decreased in 5500 in August after increasing in July 7100. The most optimistic forecasts are thus promising an increase of 24,200. Increase the unemployment rate by 0.1 percent to 7.3 percent.

The Standard & Poor's 500 fell to 3 percent, while S & P / TSX Composite Index fell 2.2 Canadian cent.

The mood was depressed markets as talks abound that Greece may leave the eurozone. The negative sentiment pushed the loonie (the Canadian currency's nickname) down against the U.S. dollar. UU. and the yen, but were allowed to exceed the euro.

USD/CAD jumped from 0.9893 to 0.9967 as of 20:41 GMT today. CAD/JPY fell from 78.28 to 77.75 after touching the intraday low of 77.31. EUR/CAD fell from 1.3732 to 1.3606.
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BoE Keeps Main Interest Rate Unchanged, GBP/USD Fluctuates

The British pound against the dollar fluctuated today after the Bank of England kept its main interest rates unchanged yesterday and today's report showed that producer prices fell last month. The pound rose against the yen.

The Bank of England left the official Bank rate at 0.5 percent and purchases of assets by £ 200 billion yesterday. The minutes of the monetary policy meeting is scheduled to be released on September 21. The entrance to the Producer Price Index fell 1.9 percent in August from July. The output of the PPI increased at a slower pace in August - up 0.1 percent, compared with growth in July - 0.3 percent.

GBP/USD traded near its opening price of 1.5958 as of 12:06 GMT today, following the drop to 1.5893. GBP/JPY rose from 123.63 to 124.13.
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ECB Keeps Rates Unchanged, Euro Falls

The euro weakened today, falling for a second day against the dollar and the yen after European Central Bank kept its key interest rate unchanged yesterday.

The ECB left its minimum bid target of 1.5 percent. Central Bank President Jean-Claude Trichet said at a press conference after the monetary policy decision:

Looking ahead, we expect the euro zone economy will grow moderately, subject to uncertainty particularly high and the intensification of downside risks. 

Trichet said the euro zone's gross domestic product is expected to grow "very moderately in the second half of this year" and the ECB revised its projections for GDP growth downward.

EUR/USD slipped from 1.3808 to 1.3810 today as of 11:42 GMT after rising to 1.3939 earlier. EUR/JPY went down from 107.58 to 107.43.
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