FX Market Overview
 
What a weekend for sport and for outsiders. Before the start of the Formula 1 season, you would have been given astronomical odds on Jensen Button winning the first two races; a 100-1 winner in the Grand National carried on this long-shot success theme and who would have thought a 17 year old making his 1st team debut would score the winner of Manchester United in such a crucial game? What’s more, both of Halo Financial’s Paris Marathon runners, Alexandra Pugh and Ricky Nelson arrived back in the office this morning having completed the 26 miles 385 yards (42.195 kilometres) and lived to tell the tale. Sadly my ‘no blisters and not out of breath’ prediction proved to be a little inaccurate.

And that leads us neatly on to Alistair Darling who has admitted his economic predictions have been rather wide of the mark.  In fact, his suggestion that we would see 2.75% growth when he now forecasts 3% contraction in the economy is about as wide as aiming at the bull’s-eye and hitting your own backside. His budget, due in a couple of weeks is going to be very interesting; with an economy in a slowing decline, he should probably be cutting public spending and raising taxes but he will be under extreme pressure not to do so this side of the election, which is due within the next year.

Back in the current problems; last week’s US employment data was dreadful and in normal trading times, that would have weakened the US Dollar and the US Dollar did actually weaken last week but not for that reason. What moved the market was a wave of semi-euphoric enthusiasm for the G20 summit’s pronouncement that the world leaders would throw vast sums of money at the global financial meltdown. That prompted more appetite for riskier investments, so international investors sold out of some of their US treasury certificates and bought into the Australian Dollar, New Zealand Dollar and even the Pound. That is why the US Dollar is weaker this morning than it has been against the Pound since 12th January and why it is at the top of its trading range against the Euro. That makes me believe that, from a technical standpoint, we are set for a week of US Dollar strength. However, Sterling had a very good week last week and we may well see more of that against the Australasian currencies if not against the Euro, as the Sterling - Euro exchange rate is at the very apex of its trading range this morning.

The news of this week is all about interest rate decisions from central banks.  It starts tonight with the Reserve Bank of Australia which is going to upset some people whatever they decide to do. The general market forecast is that they will do nothing and leave the Australian base rate on hold at 3.25%. However, in one survey of market analysts, of the 19 participants, 10 thought they would cut interest rate and 7 of the 10 thought they would cut by 50 basis points. What that means dear reader is that we will see some significant volatility overnight tonight and those who need to either buy or sell the Australian Dollar would do well to have an order in the market tonight to try to capture some of that excitement.

Then we get a ‘no change’ decision from the Bank of Japan; with a 0.1% base rate, what else could they do?, followed by the Bank of Korea and the Bank of England making their interest rate announcements on Thursday. Neither is expected to move their base rates but the BoE has surprised the markets before and could do so again. After all, UK data is still looking abject and forecasts for the depth of the decline of the UK economy have not yet stopped falling.

On top of these items, we have a pretty lively data diary this week with manufacturing, trade balance and employment data from various sources and it is all crammed into a week shortened by bank holidays around the globe so the excitement may be short lived but it could well be quite intense. I would urge anyone with any kind of currency requirement to make that requirement known to your Halo Financial consultant so that you can jointly assess your best strategy in this tense environment.

 And finally, many products have had their names changed in the pursuit of increased sales, Opal Fruits became Starburst, Marathon became Snickers and Jif became Cif and now even the fish variety, Pollack is being rebranded. From now on Sainsbury’s will sell this tasty fish under its new trade name, Colin. You couldn’t make it up could you!  

****STOP PRESS**** EU retail sales have just been announced for February and it showed an annualised drop of 4.0%, the largest decline since they started measuring these numbers in 2000.
 
 
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A time will come when a politician who has wilfully made war and promoted international dissension will be as sure of the dock and much surer of the noose than a private homicide. It is not reasonable that those who gamble with men's lives should not stake their own.
 H. G. WELLS
 
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