SendMoneyHome brings you the latest currency news - 22/07/2010

July 22, 2010 - PRLog -- Good afternoon, yesterday was the day of the eagerly anticipated minutes of the Bank of England meeting and although the discussion over interest rates resulted in the expected outcome, there was some mention of further monetary stimulus into the economy. Which, many may construe as indication of a faltering economy. There is also rumour and speculation that some of the bank stress tests European bank stress tests may come out today as opposed to tomorrow... well I guess we’ll have to wait and see. Travalex, Moneycorp, Currencies Direct, and TorFX provide the market highlights today.

Market introduction by Stuart May

Travalex

Sterling fell against the dollar on Wednesday after Bank of England minutes showed a 7-1 vote in favour of keeping interest rates at 0.5% this month. A 7-1 vote had been widely expected by most analysts, though some had suggested slight risk of a 6-2 outcome, with some analysts speculating that BoE chief economist Spencer Dale may have joined Sentence.

The euro fell broadly, slipping to the week’s lows against the dollar, after a Portuguese Treasury bill auction showed yields more than doubling from the previous sale. Although Portugal was able to raise €1.25 billion in the sale, the single currency slipped as investors demand more returns to hold government debt.

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Moneycorp

MPC discussed quantitative easing
- But one member again voted for higher rates
- UK retail sales today


An hour and a half later, when the Monetary Policy Committee minutes came out, sterling was a little higher than it had begun the day but it was about to have its cage rattled once more. The minutes concluded positively enough, with Andrew Sentance voting for an increase in the Bank Rate, but the middle bit sowed confusion in the minds of investors. In paragraph 31 'The Committee considered arguments in favour of a modest easing in the stance of monetary policy... A further modest monetary stimulus would act to offset the softening in demand prospects and make it more likely that the inflation target would be met in the medium term.' The proposal did not make it as far as a vote but the MPC now clearly has at least three points of view to balance; tightening, steadiness and easing. It was not exactly what sterling needed to hear. The pound headed south and opens this morning lower against most currencies.

The euro's problem came with an unsuccessful government bond auction. No, it was not the dodgy southern stuff that investors spurned; it was 30-year German 'bunds'. Berlin had wanted to sell €4 billion but received bids for only €3.8 billion and even some of them were too low to be sensible.

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Currencies Direct

Central banks closely watched
Cable had a volatile days trading yesterday, just before 8am we saw a huge Sterling sell, dropping from 1.5290 to 1.5168 in a minute before recovering after reports of a fat finger or algorithmic trading problem at a bank in the Netherlands. Whatever happened, we are sure someone is seeking alternative employment this morning.

Sterling has just received a welcome boost after the release of positive retail sales figures. Data showed a 0.7% increase month-on-month & 1.3% yoy, the highest monthly figure since April 2008. Bank of England minutes released yesterday showed a 7-1 vote in favour on keeping interest rates on hold, with Andrew Sentence, the only dissenter, voting for a rate rise. More interestingly, the minutes showed discussion of an extension to the asset purchase scheme if, as expected, the economic outlook continued to deteriorate.

The Euro continues to tread water ahead of the Stress test results. There is increasing uncertainty around the release of the results, the planned announcement is tomorrow at 4.30pm, but there are rumours that they may even release the figure today.

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TorFX

GBPEUR/GBPUSD

The Pound recovered some recent losses against the Euro yesterday, pipping just above 1.19 in London, while the UK currency also peaked at $1.5334 versus the Dollar, before declining later in the day. The minutes from the Bank of England's last policy setting meeting showed that all members voted unanimously to keep the bond-purchasing program unchanged at £200 billion.

The eight member committee, led by the governor Mervyn King, also voted 7-1 to keep interest rates on hold at a record low of 0.5%, with Andrew Sentance again voting for a 25 basis point increase to combat inflation. The tone of the accompanying statement seemed to suggest that policy makers are becoming a little uneasy about persistent inflationary pressures, but still refuse to tighten policy and risk a "double dip" recession.

The Pound has gained 5% against the Euro this year on speculation that the UK economy will recover more quickly than the Euro-region, which have been undermined by the sovereign debt crisis that has spread from Greece to Spain and other peripheral nations.
EUR/USD

The Euro declined against the Pound and the U.S Dollar yesterday, amid further uncertainty over the bank stress tests due on Friday and there were increased doubts whether the tests would be robust enough to reassure investors. The Portuguese bond auction also disappointed investors with weakening demand for securities, after the failure in Hungary earlier in the week.

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