Portugal Downgrade & Chinese Rate Hike - The Euro was knocked off its five-month high perch after Moody's Investors Service downgraded Portugal's long-term government bond ratings by one notch to Baa1 from A3 and placed the rating on review for possible downgrade, saying debt problems on the euro zone periphery may prevent the European Central Bank from raising rates three times this year, which the market is pricing in. Also, there were reports that one of Portugal's biggest banks threatened to stop buying its government's debt, instead urging the caretaker administration to seek a short-term loan. Meanwhile in the UK, the GBP jumped after the purchasing managers index for the services sector unexpectedly rose to a 13-month high. The data is unlikely to convince the Bank of England’s Monetary Policy Committee to hike its key lending rate on Thursday, but since the services sector makes up over 70% of GDP it and increases the likelihood of a rate hike in May. In Asia, the People's Bank Of China raised the 1yr deposit rate by 25bps which took the sails out of the AUD's latest uptrend. Also, the Reserve Bank of Australia keeps rates unchanged at 4.75% after Australia suffered its first trade deficit in 11 months, mostly due to the economic fallout of the flooding in Queensland. Meanwhile in Japan, the USD/Yen is headed toward the 85 level after rumours that the Bank of Japan is considering offering temporary loans to banks to aid companies with cash-flow shortages following the March 11 earthquake. In the US, last night's speech by Federal Reserve Chairman Ben S. Bernanke didn't yield any new views. He basically said that inflation must be watched “extremely closely,” but that he felt that the current uptick in inflation was transitory, which in Fed speak means that he thinks that they are temporary in nature. I wouldn't expect any new revelations in today's release of the FOMC minutes. Interestingly, the Wall Street Journal reports that Goldman Sachs economists don't see the Federal Reserve raising short-term rates until 2013, which is well beyond what markets currently anticipate. In Canada, the CAD has firmed against the USD this morning despite slightly lower oil prices and slightly higher risk aversion due to China's rate hike. The market is waiting for Friday's employment report for Canada and until then it will take its cues from the equity markets.
Here are the interbank mid-market rates at the time of posting:
EUR/USD 1.4167 USD/CHF 0.9245
GBP/USD 1.6238 USD/CAD 0.9654
AUD/USD 1.0326 EUR/CAD 1.3681
NZD/USD 0.7693 GBP/CAD 1.5677
USD/JPY 84.67 USD/MXN 11.8634
No comments:
Post a Comment