LONDON (Thomson Financial) – The dollar recovered slightly after taking a battering yesterday, but it remained weak in very cautious trade as investors awaited this evening’s meeting of the Federal Open Market Committee.
Markets are now betting that the Fed will cut interest rates by as much as 100 basis points and there is a great deal of nervousness about the potential impact on financial markets if they fail to deliver.
With little of note out of the euro zone today, markets will also keep a close eye on earnings news, particularly on results from Goldman Sachs and Lehman Brothers after the collapse of Bear Stearns at the weekend caused the dollar to slump to record lows against the euro and 12-year lows against the yen.
Meanwhile, the pound also recovered after huge falls yesterday which took the currency to a six-day low against the dollar and a new record low against the euro.
The falls came after the Bank of England announced a 5 bln stg exceptional fine tuning operation in response to very tight conditions in money markets, as well as market fears that the UK could be badly exposed to the credit crisis.
Attention today will turn to the release of UK inflation data, where the consensus is for key annual CPI inflation to rise further above the BoE’s 2.0 pct target to around 2.5 pct in February from January’s 2.2 pct.
Evidence of rising inflationary pressures would continue to tie the Bank of England’s hands in terms of its room to cut interest rates, though in the current climate this is unlikely to provide much support for sterling given worries about the growth outlook.
London 0911 GMT Hong Kong 1.00 pm (0500 GMT)
US dollar
yen 97.64 up from 97.12
sfr 0.9875 up from 0.9811
Euro
usd 1.5775 up from 1.5774
stg 0.7861 down from 0.7875
yen 154.05 up from 153.28
sfr 1.5581 up from 1.5480
Sterling
usd 2.0063 up from 2.0027
yen 195.82 up from 194.52
sfr 1.9816 up from 1.9652
Australian dollar
usd 0.9251 up from 0.9221
stg 0.4611 up from 0.4603
yen 90.34 up from 89.52
**bold figures are some key statement for future trading. good luck!
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