Sterling traded lower against all 16 of the most actively traded currencies by the London close yesterday with inflation figures doing nothing to change the view that UK rates remain on hold for some time yet. The release today of the minutes of the August Bank of England policy meeting has reinforced this outlook as policy members voted 8-1 to keep Interest rates on hold. As anticipated Andrew Sentence has voted for a rate hike for the third consecutive month, whilst stating that consumer prices will need to be closely monitored in the coming months.

The softening economic data globally and in particular in the US in recent months has caused expectations for rate hikes to falter. Several central banks, including those of Canada, Norway, Australia and New Zealand have cited weaker growth in the US and Euro-Zone and downside risks to the global economic recovery. What is clear also is that Emerging market central banks are also remaining cautious with the most recent dovish statements coming from both the Bank of Korea and Banco Central do Brazil who have stated that growth forecasts have had to be revised down in recent months following weaker data coming out of the US. The softening tone of the FOMC’s economic outlook has dominated market sentiment over the last week, causing risk sensitive currencies to weaken and safe heaven currencies like USD and JPY to appreciate. Buyers into the Dollar are advised to work “Stop” orders or consider covering any outstanding requirement as the outlook remains bearish on the GBP/USD and EUR/USD cross.

Forex markets took a slight breather yesterday with currency crosses confined to relatively narrow ranges in subdued trade. The euro, though, saw good movement in late US trade by relief at the strong demand for the Irish bond auction and also the successful sale of Spanish Treasury bills. However, ongoing concerns about the sustainability of the eurozone economic recovery were highlighted by a further fall in the German ZEW investor sentiment index, which saw a significant drop below projected forecasts.

Currency markets were clearly risk adverse overnight with the US Dollar and Japanese Yen tracking higher against all of their major counterparts. Stock markets also rose overnight during the Assian session following Wall Streets advance with better than expected US Industrial production figures. Sterling has opened up down from the highs seen last week against virtually all of its counterparts with buyers into both the EUR / USD / CAD / AUD and NZD advised to consider short term requirements as sentiment turns negative.

If you are looking to buy / sell into any of the 16 most actively traded currencies do not hesitate to give me a call, equally if you would like to discuss the various contract options we offer then please get in contact.

Tom Trevorrow

Senior Trader

+0044 1736 335264

tom.trevorrow@torfx.com