Despite an initial blip early in the day, the news of Moody’s rating downgrade for Greece had little overall impact on the euro, as the single currency continues to be supported by talk of higher interest rates from the ECB at its April meeting. The EUR hit a four month high against the dollar yesterday, breaking through $1.40, before consolidating just below this level later in the trading session.

Many see the single currency as on track to retest the highs of almost $1.43 seen last November, as it is supported by buying from real money accounts. Meanwhile, the dollar continues to be undermined by unrest in Libya, soaring oil prices and the likelihood that the Fed will be behind other major central banks in terms of tightening monetary policy. Traders are now also concerned about the situation in Saudi Arabia, where some have called for demonstrations later in the week.

The ECB head Trichet said yesterday that central banks across the world are ready to do whatever it takes to avert a sustained rise in inflation expectations, though there is little sign that the Fed is in an equally hawkish mood, despite the fact that oil price futures remain well above $100 a barrel. Fears of higher inflation could put pressure on the Bank of England as it meets to discuss interest rates this week, with the UK CPI already at twice its preferred level.

Sterling is somewhat vulnerable ahead of the policy announcement, falling back against the dollar and euro yesterday. UK housing data released overnight, showed the market flat in February. According to the RICS survey, the price balance improved but remains negative. Meanwhile, the BRC sales survey for last month was not supportive of sterling either, with the report showing sales values down 0.4% year-on-year, compared to a gain of 2.3% in the previous month.

Anyone looking at sell Euros at this stage can enjoy a five week high against the Pound, this is trading towards the bottom end of its range and currently remains stable on the day. As we know the Pound has seen 4 consecutive days of selling and remains largely bearish against many of its counterparts. If you wish to discuss your requirement with an advisor do not hesitate to contact +0044 1736 335264.

Market Commentary by Tom Trevorrow

Regards,

Tom Trevorrow
Account Manager Tel: +44 (0)1736 335264 | SMS: +44 (0)7860 001101 | Fax: +44 (0)1736 369435