Currency Update – Tuesday 28th April

Currency Update – Tuesday 28th April

Whilst travellers may be less keen on heading to the Americas, investors have flocked to the safety of the US Dollar. Fears of a swine-flu pandemic have dominated international news, the anxiety reflected in falling equity indices globally, and a retreat to the safe-haven currencies. On this basis, the Yen has also strengthened - having hit 2009  highs of 151 only 3 weeks ago, GBP/JPY is now at a month-low of 139. With the World Health Organisation raising its pandemic warning from level three to four, new cases appearing in different locations, and the UK government's Cobra emergency planning committee already in discussions, markets will be watching developments with a close eye.

The biggest loser across the major currencies yesterday was the Euro. EUR/USD posted its largest one-day fall in a month (dropping from over 1.3250 to 1.3000), after an ECB official said the bank was ready to use quantitative easing measures, if required. Both the GBP and USD were sold heavily when the BoE and Fed announced quantitative easing (printing money) in early and mid-March, respectively. It’s clear that traders are itching to dump the EUR should the ECB make a similar announcement. ECB head Trichet said that full details of further “non-standard” measures would be released at the central bank’s next meeting on May 7 when its is widely expected to cut interest rates by 25bps to just 1%. GBP/EUR rose from 1.1080 to 1.1230 on the back of this, and is now trading around 1.1180.
 
With significant data releases very thin on the ground today, the currency markets may be keeping their powder dry in anticipation of the glut of news releases tomorrow. The Eurozone will provide consumer, economic & industrial confidence figures, the US will have the Fed Funds Rate decision, GDP figures and the purchases price index, and we also have interest rate decisions from Japan and New Zealand.

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