Posted October 27, 2009
The UK pound strengthened against the US dollar and euro as analysts predict rise in retail sales. Norway is set to become the first European country to raise benchmark interest rates since the start of the recession. The Japanese yen rose against the US dollar and euro.
The UK pound strengthened again when paired with the US dollar and the euro as analysts predict a retail sales report to be issued soon will show an increase in spending. The UK has been struggling with an uneven economic recovery that has been dragging on the pound. The expectation that retail sales are rising is giving sterling a boost.
Investors have been trying to determine if the UK would need a resumption of its quantitative easing program. That has been dragging the pound down also. If retail sales show an increase and the bond buying program can remain in limbo the pound is expected to strengthen further. The quantitative easing program was never ended. It was only suspended in a "wait and see" approach.
The pound has strengthened before the report against most major global currencies to $1.6438 against the US dollar and to 90.62 pence against the euro.
Australia was the first developed nation to raise its benchmark interest rates as the recession comes to an end in parts of the world. It appears the next country, and the first European nation, to follow suit will be Norway. The Norges Bank is expected to raise the interest rate to 1.75 percent. The price of oil had risen to over $80 a barrel and the fifth largest oil exporting nation has managed to enter a period of recovery that started the second quarter of 2009. If the bank increases the interest rate at its meeting this week, it will probably not be the last increase. Oil prices have fallen back to between $77 and $78 a barrel.
The krone is at 8.3750 krone per euro.
The Japanese yen rose against the US dollar and euro amid declining stock markets. The yen strengthened to 91.93 yen per US dollar. It rose to 136.386 yen per euro. The rise in the yen was attributed to a couple of factors. One is the fall of stock prices forcing investors to seek safe haven assets. A second reason is the sign loose monetary policies are on the verge of being tightened and the uncertainty of how and when this will happen is creating demand for the safer assets. There is a fear there will be a large correction in the stock market because stock prices have risen too high and too fast.
The national Australia Bank Ltd. issued a report that said the Australian business confidence index rose to a positive 16 points for the third quarter of 2009.
The Canadian dollar fell after the Bank of Canada Govern Mark Carney reiterated the fact the currency has become too strong. A strong currency is threatening the pace of recovery in Canada. The Canadian dollar fell to C$1.0694 against the US dollar which means one Canadian dollar will purchase 93.51 US cents. The Canadian dollar has risen by 19 percent against the US dollar this year. The central bank intends on maintaining the benchmark interest rate at .25 percent at least through the first half of June 2010.