Dollar spurred by positive labour figures, as Bank of England keeps policy on hold for now

Tom Tong10/May/2013Currency Updates

GBP

The BoE kept interests rates at .5% and quantitative easing at £375bn unchanged which was widely predicted. We do not forecast a change in policy until the new Bank governor, Mark Carney arrives in July, as the MPC meeting was the penultimate one for Sir Mervyn. The new governor Mark Carney may utilise the FLS programme as a more effective way of boosting the economy than QE.

Recent data has suggested the UK economy is picking up with industrial output at .7% in March from February and Manufacturing output rose by 1.1%.

Data releases today are thin on the ground the only report of note will be the goods trade gap which is expected to shrink to £9bn from £9.4bn in February.

EUR

The euro fell against the dollar on Thursday after two days of gains, hurt partly by a weaker-than-expected Spanish debt auction that served as a reminder to investors that the outlook for the eurozone’s weaker nations remained uncertain.

Spain auctioned debt maturing in 2016, 2018 and 2026 yesterday. The government’s 10-year bond yielded 4.10% on Wednesday and touched a three-year low of 3.94% on May 3. In Portugal, investors submitted bids for 10.2 billion euros ($13.4 billion) of the nation’s 10-year notes being sold via banks on May 7, compared with the 3 billion-euro target.

The government of Slovenia has announced a package of measures it hopes will help avoid an EU bailout. The measures include a tax increase, a major restructuring of Slovenia’s ailing banking sector, and a programme of mass privatisation. The European Commission will now consider the plan and is expected to deliver its verdict by the end of the month.
It may be revealed by German data today that exports from the euro region’s largest economy rose 0.5% in March from a month earlier when they dropped 1.5%, according to the median economist estimate. The nation’s industrial production grew 1.2% in March from a revised 0.6% expansion the previous month, a government report said yesterday

USD

The greenback was spurred past the psychologically important 100 yen level on Thursday after encouraging employment figures were relesed by The U.S. Labour Department stating that the number of Americans who applied for unemployment benefits last week fell by 4,000 to a seasonally adjusted 323,000. Layoffs have receded to pre-recession levels. Such data has caused debate by officials at the U.S. Federal Reserve about scaling back its asset purchases.
Due to recent Dollar strength Brent crude fell 53 cents to $103.94 a barrel on the ICE Futures exchange in London, analysts said the strong dollar has been impacting commodities prices generally.
Today, Fed Chairman Ben Bernanke will talk about how the central bank monitors finance in a speech at the Chicago Fed’s annual conference on bank structure and competition.

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Written by Tom Tong

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