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It Snow Laughing Matter ….

Currencies Direct February 3rd 2009 - 2 minute read

It Snow Laughing Matter ….

… with the Met Office predicting more white stuff to come later in the week, falling on top of the ice rink that used to be roads and pavements. At least most trains seem to be running and the majority of desks in the City will be manned (and womanned) today.

Yesterday was very thin on volume and news but the downgrading of Barclays by Moody’s, the weakness of the UK data that was forthcoming and continued expectation of a widening interest rate differential between Sterling and Euro were reasons enough to send Sterling off its Friday highs. Today’s DMO auction of GBP 3.75 billion of short dated gilts will again be awaited with concern that its reception might not be as healthy as the Treasury would like.

Wall Street dropped yesterday after the opening bell as concern over the fate of the stimulus package and the economy weighed on sentiment.  Stocks pared their losses, however, as the manufacturing ISM data was reported better than expected. Financial stocks led the index lower amid worries that the “bad bank” plan is faltering. This factor, added to the uncertainty of the fate of the stimulus bill caused Treasuries to strengthen with term LIBOR rates rising to 3-month highs. The rally in treasuries came as something of a relief to the market following last week’s flood of new issuance ($ 135 billion worth) which had pushed longer yields up by 20 basis points. The Treasury will announce its latest quarterly refunding today and release the size for the 3y, 10y and 30y issuance for next week. Also next week, as reported in today’s press, the new Treasury Secretary Geithner is expected to lay out plans for the financial rescue package. Given Obama’s recent assertions that he wants to prevent more foreclosures than are absolutely necessary and his warning that “more banks will fail” before this crisis is over, means that the speech will attract evn more attention from the market.

Elsewhere, the Reserve Bank of Australia cut rates by 100 basis points last night to their lowest level since 1964 and announced a further A$ 42 billion stimulus package for the beleaguered domestic economy. Australia has suffered greatly at the hands of reduced global demand for its mined resources, especially from China who were the major consumer of the country’s raw materials. The Aussie had a bit of a wobble but in the end firmed up on relief that the cut wasn’t greater. Having said that, the central rate is still at a heady 3.25% which leaves plenty of room for additional cuts to come.

The contents of this report are for information purposes only. It is not intended as a recommendation to trade or a solicitation for funds. Currencies Direct cannot be held responsible for any loss or damages arising from any action taken following consideration of this information.

 

The contents of this report are for information purposes only. It is not intended as a recommendation to trade or a solicitation for funds. Currencies Direct cannot be held responsible for any loss or damages arising from any action taken following consideration of this information.

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Currencies Direct

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