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GBP/USD Soars Above 1.4700 As Risk Seeking Continues
Last Updated 3/24/2009 6:24:57 AM EST (GMT +5)
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High beta currencies enjoyed a rally for the second night in a row boosted by further gains in equities and continuation in risk appetite. Carry flows were once again the dominant theme in Asian trade with USD/JPY rising to 98.40 while many the yen crosses reached their highest levels since last October. The Nikkei followed through on the nearly 500 point gain in the Dow rising 272 points but the gains on the European markets were decidedly more modest with most indices barely above break even.
Asian Markets Rise
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On the economic front the EZ PMI readings rose for the first time since last September indicating that business activity in the region may be finally stabilizing. As we wrote earlier, “The region’s fiscal and monetary authorities have been far less aggressive than their US counterparts in stimulating the EZ economy and so far ECB President Jean Claude Trichet has resisted any attempts to move the central bank towards quantitative easing, insisting that the current plans in place will be enough to revive the moribund European economy. Today’s data while hardly inspiring does suggest that business activity in EZ's two most important economies may have found a bottom for the time being and could validate Mr. Trichet point of view. Still, the undeniable aspect of today’s reports is that EZ continues to suffer from a very sharp reduction in demand and even if the recovery come it is likely to be very slow and tepid.“
The euro however was a laggard most of the night rallying only because of EUR/JPY flows, but the pair held above 1.3550 support and unless it breaks the 1.3500 handle to the downside its uptrend remains in place. One source of pressure for the unit were reports by German newspaper Bild that the an internal ministry report in Germany is forecasting a contraction of 4.0-4.5% in the economy this year..
Cable on the other hand performed much better rising as high as 1.4780 in the aftermath of hotter than expected UK CPI data which printed at 3.2% versus 2.6% expected. Still, the fundamental news in UK remains negative with MPC’s Balnchflower forecasting a doubling of unemployment rolls to a staggering 4M jobless. The currency market however is ignoring the gloomy forecasts for the time being.
The Geithner plan has sparked a flurry of risk taking activity across all capital markets and the high beta currencies are enjoying the ride. With little economic data on the US calendar, North American session is likely to be driven by the same risk dynamics that have dominated trade from the start of the week. If DJIA could put in another positive session the high yielders and their yen crosses push higher as the day progresses.
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About The Author
Schlossberg has more than 20 years experience financial trading on Wall Street. His daily currency research appears in numerous newspapers worldwide and Schlossberg serves as a regular contributor to CNBC's Squawk Box and Bloomberg radio and television. Read more >>