New Overnight Developments Abroad: Sterling Extends Recovery

October 21, 2009

The dollar has dropped by a further 1.0% against sterling, which got as high overnight as $1.6590.

  • Bank of England minutes revealed a unanimous 9-0 vote not to increase the Gbp 175 billion target level on asset purchases.  Vote to retain 0.5% base rate was also unanimous, but…
  • Bank of England Governor King told fellow Britons to start preparing for an eventual rate increase.
  • British ten-year gilt yields are 10 basis points higher at 3.64%.

The dollar gained another 0.5% against the Canadian dollar but slid 0.5% against the New Zealand dollar.

  • The Bank of Canada policy announcement yesterday stressed “heightened volatility and persistent strength in the Canadian dollar are working to slow growth and subdue inflation pressures.”
  • Whereas, in contrast, RBNZ Governor Bollard today said that the elevated kiwi will not necessarily impede a decision to raise New Zealand interest rates.  Analysts are gearing up for such a move around the end of 1Q10.

The dollar is unchanged against both the euro and yen, off 0.1% against the Swiss franc but up 0.2% against the Australian dollar.  Market players wonder how long it will be before dollar support at 1.50 per euro gives way.  Bank of Japan Policy Board member Nishimura overnight said Japanese interest rates need to be left near zero; “It’s important to tenaciously keep financial conditions accommodative.”  He stressed the economy’s fragility.

Chinese yuan forwards fell for the first time in a week, as speculation that officials will soon let such appreciate settled back.

The yield on 10-year JGB’s seems to have crested for now at a still-low 1.36%.  Such is unchanged on the day versus 1.26% on October 2nd.

The Nikkei closed unchanged, but stocks are lower in Europe: Paris Cac off 1.4%, German Dax minus 1.1%, and British Ftse down 1.4%.  Stocks fell by 1.2% in India, 1.0% in Indonesia, 0.7% in Singapore and Taiwan, 0.3% in Hong Kong, South Korea, and China and 1.1% in New Zealand.

Gold and oil fell by 0.4% and 1.1% to $1054.50 per ounce and $78.28 per barrel.

In Britain, the CBI released a new quarterly industrial trends survey, showing an improvement to minus 8 from minus 31 in July.  The monthly index worsened to minus 51 from minus 48 in September.

The Bank of Thailand kept a policy rate of 1.25% as expected, noting subdued inflation pressure from the demand side.  The Thai trade surplus in September of $1.98 billion was smaller than expected and less than August’s $2.08 billion surplus.

New Australian auto sales rose 2.9% last month and posted a 2.0% on-year drop.  Australia’s index of leading economic indicators recorded a second straight monthly gain of 1.1%.

Dutch consumer confidence softened to minus 19 in October from minus 17 in September. That paralleled news yesterday from Belgium that consumer sentiment there had ticked down a point to minus 12 from minus 11 in both August and September and a cyclical low of minus 25 last December.

Swiss M3 rose 7.8% in the year to September, accelerating from 7.4% in the year to August.

The British Treasury projects a 1.2% increase of GDP next year after a 4.3% drop in 2009.  CPI inflation is expected to hover slightly under 2% in both years.

The Fed Beige Book, a regional rundown of the U.S. economy, gets released today.  Several Fed officials speak today.  Brazil’s central bank holds an interest rate meeting and is expected to retain an 8.75% Selic rate.


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