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Video for April 21st, 2008 (3 min 12 sec): Pound and Dollar Fall to Euro on Hawkish Comments and Flat Reaction to Bank of England Plan UK RightMove House Prices Only Up 1.3% on the Year in April UK's Rightmove House Price Index showed that the asking price for houses in April was only 1.3% higher than last year in April, the lowest annual price growth since July 2005. On the month, prices were down 0.1%. Inventories of unsold homes are building up, and are staying in the market longer. On the bright side, this boosts first time buyer affordability as well as creates a wider selection. Bank of England Attempts to Stimulate Mortgatge Lending The Bank of England officially announced that it will swap for 50B pound of infected mortgage-backed securities for government bonds. The market has come to expect these periodic injections and bailouts and thus has become hungry for more extreme measures. The Sterling was pressured after the BoE's unveiled its credit relief plans. EUR/GBP - Euro Pares Friday Losses To Pound
The continuing drop in house prices and less than inspiring plan for a 50B pound asset swap pressured the Sterling. Meanwhile, the ECB sounded off more hawkish statements regarding the rising energy costs and inflation. This divergence of focus between the two central banks paved way for a climb of nearly 150 pips in the EUR/GBP pair by 2:00PM EST GBP/USD - Pound Sinks vs Dollar Despite BOE Plan
The pound also plunged against the greenback after the announcement. By 2:00PM EST, the GBP/USD pair slipped 200 pips from the session high. Again, the pound weakened due to market jitters regarding the effectiveness of the central bank's credit relief plan. EUR/USD - Euro Pares Friday' Losses
The euro pared all its losses against the greenback from last Friday and gained nearly 150 pips since this week's session opened. Hawkish statements from the ECB reinforced inflation as the main concern of the bank at the moment. The rally in teh EUR/USD pair stopped short of its all time high, and retreated to just below the 1.5900 level. by 2:00PM EST. AUS PPI Increases 1.9% for 1st Quarter Australia's first quarter inflation for producers rose higher than expected. The 1.9% quarterly increase was the largest since the series began. The annual figures also exceeded forecasts, and registered 4.8%. Although an interest rate increase from its 12-year high of 7.25% is already unlikely, Sunday's inflation figures will make a rate cut harder to come by as well. AUD/USD - Aussie Climbs on Inflation Data
The Aussie gained after the inflation report and the AUD/USD pair climbed 100 pips from Sunday's session open to 0.9440. By 2:20 PM EST, the pair had retracted slightly to 0.9410. CAN Foreign Securities See Rebound in February Demand for Canadian securities from oversees as well as Canadian's appetite for foreign investments both rebounded. In the backdrop of slowing economic growth, investments due for the US market have shifted to the less anemic Canadian market. The price for a barrel of crude oil has reached another record high of $117, boosting the Loonie. USD/CAD - Loonie Gains on Surging Oil Prices
After the greenback threatened to breakout of its overnight narrow trading with the Loonie, the USD/CAD fell 80 pips. The Canadian dollar gained on the back of another oil price surge, and the positive foreign securities purchases report, both occurring at around 8:30 AM EST. By the afternoon however, the pair has returned virtually back to where it started at the week's open.
Upcoming Releases
Switzerland will kick off tomorrow's fundamental docket with trade balance. Then the Bank of England meets to decide on interest rates, with some anticipating a rate cut. The US will release Existing Home Sales, House Price Index, and Richmond Fed. |
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