Rates held as Greek debt swap deal agreed, as market looks ahead to Non Farm Payroll figures

Tom Tong09/Mar/2012Currency Updates

GBP

Sterling recovered against the Dollar yesterday by 0.4% after hitting a 10 day low on Monday. A below-forecast service sector survey had weighed on the pound earlier in the day but its impact was limited as the data still suggested the UK economy was recovering and would probably avoid falling into another recession. The BoE MPC left UK interest rates on hold at 0.5% for March and chose not to extend the banks QE Scheme yesterday, following this announcement sterling has traded on a neutral footing and is expected to do so as long as this mornings UK industrial and manufacturing production numbers do not weigh down.

BOE Governor Mervyn King also warned of increased inflationary risks as well as potential uphill battles of the economy due to the government’s fiscal consolidation plans. But since the BoE’s decision was widely expected, the pound strengthened due to risk appetite in markets instead.

EUR

The Euro edged lower on profit-taking today after Greece said 85.8 per cent of private creditors had accepted its bond swap offer, moving closer to securing fresh funds needed to avoid a messy debt default. The single currency dipped about 30 pips or so after the announcement to an intraday low near down 0.3 per cent from late US trade yesterday.

In a statement following closure of the offer late yesterday, the Greek finance ministry said €172 billion in total had been tendered for the deal, which will force investors to take losses of as much as 74 per cent on their holdings. It said it had informed its international partners that it intends to enforce the collective action clauses (CAC) on any holders of the outstanding €177 billion of bonds regulated under Greek law. One trader said the currency market may take cues from moves in Euro zone debt markets and bond yields in Spain, Italy, and Portugal in the near-term.

The Euro eased 0.1 per cent against the yen compared to late US trade yesterday to 108.17 yen, having dipped to as low as around 107.75 yen after Greece’s announcement.

USD

The Anti-Dollar move that began Wednesday was extended through yesterday as the cumulative rally in risk appetite trends returned. As a result the greenback suffered its biggest one day loss in a month to the day, however, a one day move cannot be classed as a trend. The US Dollar had shown signs of easing in the markets yesterday, as appetite for risk improved in anticipation of a positive outcome for Greece’s debt deadline today and the weekly jobless claims report released missed expectations as it clocked in 362,000 instead of the projected 352,000 figure. Having said that investors will be trimming their positions and sitting tight ahead of this afternoon’s Non-Farm Payrolls data. Recent US economic figures have been encouraging, so it appears possible that the NFP number will beat expectation.

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Written by Tom Tong

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