MORNING BRIEFING: The Pound plummets following MPC Testimony.

[RTFX-Trading]

MORNING BRIEFING: The Pound plummets following MPC Testimony.

What’s new:
Euro zone: ECB member Stark voiced concerns over potential new asset bubbles.
United Kingdom: Sterling under pressure following MPC testimony
United States: Bernanke remains tight-lipped on timing of exit.
United States: Bernanke says that recession is likely over, however it will feel like a very weak economy for some time.
United States: Retail sales jumped to 2.7% in August.
United States: Strong rise in NY Manufacturing survey to 18.8 in September.

Today:


Overnight Rates and Indices:
EURUSD: 1.4694 – 1.4656.
USDCHF: 1.0350 – 1.0323.
GBPUSD: 1.6513 – 1.6432.
EURJPY: 133.73 – 132.94.
USDJPY: 91.16 – 90.48.
DowJones: 9'683.41 +0.59%.
NASDAQ: 2’102.64 +0.52%.
S&P 500: 1’052.63 +0.31%.
Nikkei: 10’270.80 +0.52%.
Shanghai: 3’011.56 -0.72%,
Gold: $998.37.
Crude Oil: $68.80.
 
Comments:

The better than expected numbers from the US yesterday sparked another rally in the equity markets and in the EURUSD. Chairman Bernanke’s positive remarks also played a role in the appreciation in the Euro and carry trades. Retail sales rose to 2.7%, versus a consensus of 1.9%, in August, also aided by the cash for clunkers program. The Empire State Manufacturing survey also showed a strong rise to 18.8 in September from 12.1 in August.

Bernanke said that the US recession was ‘very likely over’ but did not mention any future tightening or exit strategies. He warned central banks would need to ensure that they have ‘solid’ liquidity and continued by saying that unemployment may be slow to decline, which might hinder growth.

The Pound was under pressure following the testimony of several members of the Bank of England’s Monetary Policy Committee. Governor King continues to be in favor of expanding asset purchases. The MPC said that they are looking into the possibility of imposing lower/ negative interest rates on excessive reserve balances. The Pound fell from 1.6660 to 1.6403 against the US Dollar and from 0.8772 to 0.8895 against the Euro following the testimony.

Today, CPI figures from the Euro zone and US are expected along with industrial production from the US and employment figures from the UK.

Have a nice day.

Emman Xuereb
RTFX Ltd
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