Will the Pound Shrink with U.K.’s Economy?

The pound has been one of the biggest losers this year in foreign-exchange markets since several reasons, specially due to an artificial credit bubble that destabilized the British economy when the global slump crushed the world last year, forcing the pound down significantly, mainly versus the euro.
The Great Britain pound did not manage to perform well again this week in foreign-exchange markets due to a gross domestic report published this Friday that surprised analysts which forecast a timid, but important quarterly growth for the British economy, which was not confirmed, indicating that the United Kingdom remains in the worst recession in more than 50 years, shunning traders and investors from positions in the United Kingdom. British Isles economic outlook is more than a reason for the Bank of England to maintain its quantitative easing measures, which even if have not been enough effective, the situation could be worse if such measures would have not been taken, as a side effect for its asset-purchase program, the pound has been losing virtually every week in currency markets.
The GDP figures destroyed the improved sentiment towards the pound after Mervyn King’s comments suggesting that interest rates would be raised at some point, bringing back pessimism that the present economic situation in the United Kingdom remains complicated, forcing the pound down for another week.
GBP/USD closed this week at 1.6310 after touching 1.6693 before the GDP report.

Swedish Krona on Interest Rate Forecasts

The Swedish krona fell today after the national central bank maintained interest rates at a record low, indicating that the Nordic economic will require further stimulus to recover from the current recession.
Riksbank, the national banking institution of Sweden, not only left its benchmark interest rates unchanged but also declared that low levels will remain until next autumn, decreasing attractiveness for the krona since lower interest rates provide less profit opportunities for investors, consequently being the factor behind the krona’s fall today in currency markets.
EUR/SEK closed this Thursday at 10.23 from an opening rate of 10.31.

Bank of Canada Takes Measures to Force Loonie Down

After trading once again near parity with its U.S. counterpart, the Canadian dollar witnessed a significant fall today as the national central bank stated that a strong currency will cause problems and slow down the economic recovery in the country, shunning investors from Canada, at least, temporarily.
Bank of Canada held its overnight rates at 0.25 percent as most of economic analysts were expecting, but the tone of policy makers declarations was the main driver for a bearish day for the Canadian dollar, as, according to central bankers, a strong currency in Canada will impact directly and significantly the economic recovery in the country, forcing the loonie down versus most of 16 main traded currencies in foreign-exchange markets this Tuesday, as a number of traders are already expecting more effective measures from the Canadian central bank to halt its currency rally.
After trading at the highest level since July 2008, the loonie’s rally become an evident reason of concern for Canadian economic recovery, according to analysts. From now on, a dispute is likely to take place, as demand for Canadian commodities rise, forcing the loonie up, the national central bank is likely to find policies to halt the currency’s gains, as it will certainly slow down the recovery in the country.
USD/CAD traded at 1.0400 as of 13:42 GMT from a previous rate of 1.0280 yesterday. CAD/JPY traded at 86.88 as of 13:43 GMT from 88.25.

Euro Rally Concerns Central Bankers

The euro continued to remain near a 14-month high versus the dollar today, as concerns regarding the current strength of the European common currency start to emerge among ECB officials, since a strong euro could jeopardize economic recovery in its member countries.
A part from currencies based in commodity exporter countries like Brazil and Australia, the euro has been benefiting from the new wave of risk appetite that has been unleashed since signs that the global slump was ending emerged in the first semesters of the current year. Even if European Central Bank officials started to make concerned declarations regarding a strong euro and a weakened dollar, investors are still opting for the euro this week, as companies like Apple Inc. posted much higher profits for the past quarter than expected, making the euro-dollar pair to flirt with the $1.50 level.
As the euro continues to gain, versus the dollar and the pound specially, the European Central Bank may start to consider other effective measures to halt its currency strong rally, as declarations from policy bankers already show a certain degree of concern. According to analysts, market sentiment towards the euro will remain bullish, and it’s unlikely that a trend reversal could take place before the end of the year unless central bankers interventions would be taken.
EUR/USD traded at 1.4967 as of 13:18 GMT from a previous rate of 1.4918 yesterday. EUR/GBP declined to 0.9090 from 0.9130.

Canadian Dollar Near Parity With Greenback

Optimism and risk appetite ignite speculations that the Canadian dollar will soon trade in parity with its U.S. counterpart, as demand for Canadian exports are rising worldwide, as well as stocks in Toronto.
The Canadian dollar is once again trading near parity with its U.S. counterpart as the greenback suffers from a decreased attractiveness, while Canadian stocks rise, benefiting from rising crude oil prices, that is trading in the highest rate for 2009 this week, providing support for the loonie to gain before a Bank of Canada meeting tomorrow.
USD/CAD traded at 1.0286 as of 11:56 GMT from a previous rate of 1.0417 when markets opened yesterday.

Dollar Rebounds on Undervaluing Speculations

The U.S. dollar had a weak performance this week reaching record lows versus the euro and the Australian dollar but managed to pare some of its losses as traders could think the current devaluation may be too severe and that it would not reflect economic fundamentals in the U.S.
The greenback managed to gain versus most of the 16 main traded currencies towards the end of this week’s session, in a movement that many analysts considered to be a corrective, profit taking from a part of traders, but at the same time could indicate a shift in the dollar trends, as fundamentals in the country are not so negative as the sentiment towards the currency.
EUR/USD closed this week at 1.4904 after touching 1.4963 during the week.

Pound Declines Further on U.K. Economic Forecast

The pound touched the lowest level in more than six months versus the euro and posted declines versus virtually all main traded currencies as forecasts suggest that interest rates in the country will remain low in the long-term, adding doubts towards the British economic future.
The Center for Economics and Business Research in the U.K. impacted the pound outlook negatively today after statements indicating that interest rates will remain at record low levels until 2011 in the British Isles, followed by a timid increase afterward, decreasing attractiveness for the already weakened British currency, which has been one of the biggest losers in currency markets this year. The United Kingdom has been one of the least resilient wealthy countries this year, proving itself unable to cope efficiently with the challenges imposed by the global slump, consequently decreasing appeal for its currency among traders, and setting the pound to new record lows this week.
Forecasts released today by the CEBR added pessimism towards the future of the British economy, since record low interest rates mean in practical terms a longer period of economic downturns in the U.K., since interest rates are maintained low when a central bank attempts to stimulate loans to consequently reignite a country’s economy. The pound is likely to remain either neutral, or to extend its losses.
GBP/USD traded at 1.5801 as of 11:14 GMT from a previous rate of 1.5853 when markets opened yesterday. EUR/GBP touched 0.9338 from 0.9284.