Sterling slips below $1.5000 on trade balance data and credit concerns

• Home ::
• Technical ::
• Market View ::
• Daily Analysis

Wed, Mar 10 2010, 12:33 GMT
by Benny Menashe

Finotec Group Inc. | View company’s profile

The British pound tumbled to below $1.50 on Tuesday on weak economic data and as credit ratings firms warned on Britain’s sovereign rating and those of its commercial banks. Political uncertainty about a hung parliament as the latest opinion polls showed a close race in key marginal seats also hurt the pound, as well as a general pullback in riskier assets. The pound was also hit after Fitch Ratings said Britain’s sovereign credit profile had deteriorated, and urgency for fiscal adjustment was greatest for the UK, Spain and France among the larger AAA sovereigns.
But it also said Britain was still within tolerance of its top-notch rating. “Sterling has been hit by comments by Fitch; the trade data showing weaker exports; and the earlier data on the housing market,” said Hans Redeker, global head of fx strategy at BNP Paribas. “Ultimately, the move on sterling is to the downside.” The GBP/USD is currently trading at $1.4990 as of 20:21pm, GMT, with a bullish trend.

The euro dropped versus the yen after Fitch Ratings Director Christopher Pryce said at a conference in London that while the outlook for Greece is “probably OK” in the short term, prospects in the next six to nine months are less certain. There are “clearly already the beginnings of dissent within the Greek cabinet,” Pryce said. The euro erased its loss versus the yen after the European Commission said in a draft report Greece is on course to meet its budget goals in 2010. The report will be discussed by EU finance ministers at a regular meeting in Brussels next week. “Over the past few days there was optimism that the austerity packages announced would lead to underlying improvement,” said Todd Elmer, global market currency strategist at Citigroup Inc. in New York. “‘Concerns over solvency in euro area will linger, and that will weigh on the euro.” The EUR/USD is currently trading at $1.3600 as of 20:43pm, GMT, with a bearish trend.

Canada’s dollar traded near its strongest level in over seven weeks as gains in stocks and persistent strength in commodity prices drove investors into currencies tied to economic growth. “Oil prices are not far off from cycle highs,” said David Watt, senior currency strategist in Toronto at Royal Bank of Canada, the nation’s biggest lender. “Ditto for the S&P 500. There is thus a clear triangulation that puts commodity currencies in a positive light, the Canadian dollar included.” Crude oil earlier declined as much as 2.1 percent to $80.16 a barrel before trading at $81.40. The Standard & Poor’s 500 Index advanced 0.3 percent. The USD/CAD is currently trading at 1.0262 as of 21:13pm, GMT, with a bullish trend.

Today’s Economic Events

Published on Wed, Mar 10 2010, 12:43 GMT