Forex Commentary | GFT Forex

U.K. Pound Plunges on Moody's Downgrade Warning

Mon, 15 Mar 2010 09:35:57 -0500

Sterling in forex trading

Currency trading on the FX market should consider that the sterling is dropping as traders consider the latest warning from Moody's. The credit rating agency issued warnings that the U.S., U.K., France and Germany could face ratings downgrades soon with regard to their sovereign debt.

The countries that are considered most vulnerable right now are the U.S. and the U.K. And Britain is considered even more vulnerable than the U.S., reports Boris Schlossberg in FX360:

Although both Anglo-Saxon economies face serious challenges in managing their fiscal deficit problems, the UK is far more vulnerable that the US to a potential downgrade because of the relatively small size of capital markets and high dependence of its economy on the finance sector for growth.

It is little surprise that this news is resulting in a drop by the sterling in forex trading against the U.S. dollar. Added to the fact that the Bank of England might start quantitative easing again, and the fundamentals for Britain look shaky indeed.

Euro Gains in Forex Trading

Fri, 12 Mar 2010 09:24:04 -0500

Boost comes from sovereign debt fear abatement, U.S. retail sales

The euro is heading higher in forex trading on the currency market today as things improve in terms of global economic data. Helping the euro right now is the fact that U.S. retail sales showed improvement in February. This has many speculating that the U.S. really is on the road to recovery, and risk appetite is returning.

Also helping the euro is the fact that the euro zone nations are putting together plans to help prevent another sovereign debt debacle like Greece. And concerns about the Greek financial contagion are abating. GFT's Boris Schlossberg reports in FX360 on events in the euro zone:

Euro continued its short covering rally into the weekend, clearing the key 1.3740 level after several European officials lent their support to the creation of a European Monetary Fund that would be able to deal more effectively with future funding crises of its member nations.

Will the Fed Raise Rates By the End of the Year?

Wed, 10 Mar 2010 11:52:13 -0500

Looking for Fed rate hike could be coming

Will a better than expected nonfarm payrolls at the end of last week, and with the recent hike in the Fed discount rate, it looks as though things could be picking up for the economy, and the Fed is preparing to exit from stimulus measures.

As a result, there is a great deal of speculation surrounding when the Fed might begin raising interest rates. GFT's Kathy Lien offers insight into this matter in FX360:

According to futures contracts, the market is pricing in a 28 percent chance of a 25bp rate hike in August and a 42.3 percent chance that the rate hike will come in September. By the end of the year, there is a 68 percent chance that rates will reach 0.75 percent. ... [T]here is a very strong chance that interest rates will remain below 1 percent come January 2011. This is good for the U.S. economy because low borrowing costs encourage investment and spending. It will also be good for the dollar simply because outside of the Reserve Bank of Australia, the Fed is the only central bank that has toyed with interest rates (albeit the deposit rate only) which suggests that they are the closest to raising rates again.

With the Fed expected to raise rates again in the near future, and Europe and Britain expected to remain behind the curve due to their slower recovery and deficit problems, there is a chance that the dollar might retain its relative strength for a while longer.

Forex Commentary | GFT Forex

U.K. Pound Plunges on Moody's Downgrade Warning

See Also

Euro Gains in Forex Trading

See Also

Will the Fed Raise Rates By the End of the Year?

See Also