Pound Falls Amid Risk Aversion
February 11 2016 - 12:13AM
RTTF2
The British pound weakened against the other major currencies in
the early European session on Thursday amid risk aversion, as
concerns about the slowing growth of global economy and the global
central banks' measures of adopting negative rates to stimulate
economic growth dampened the investor mood.
The U.K.'s FTSE 100 index is currently down 2.21 percent or
125.31 points at 5,546, France's CAC 40 index is down 2.69 percent
or 109.09 points at 3,952 and Germany's DAX is down 2.38 percent or
214.41 points at 8,802.
Adding to nervousness, Riksbank slashed rate unexpectedly into
deeper negative territory, as it expects inflation to remain weaker
this year.
The repo rate was cut by 0.15 percentage points to -0.50
percent, from -0.35 percent. Economists had expected to retain rate
at -0.35 percent. The bank said there is still scope to cut the
repo rate further.
Investors turned cautious ahead of Fed Chair Janet Yellen's
second leg of testimony on the economy.
In the Asian session today, the pound held steady against its
major rivals.
In the early European trading, the pound dropped to a 2-day low
of 1.4397 against the greenback, coming off from its prior high of
1.4564. On the downside, 1.42 is seen as the next support level for
the pound.
The pound fell to a 9-month low of 1.3925 against the franc and
more than 1-year low of 0.7874 against the euro, from its early
highs of 1.4159 and 0.7754,respectively. The pound is likely to
find support around 1.38 against the franc and 0.80 against the
euro.
The pound weakened to 159.81 versus yen, its lowest since
November 2013, off its previous high of 165.04.The pound may test
support near the 160.00 region.
Looking ahead, at 6:30 am ET, Bank of England deputy governors
Jon Cunliffe and Andrew Bailey will appear at the Lords committee
on euro zone financial system in London.
In the New York session, U.S. weekly jobless claims for the week
ended February 6 and Canada new housing price index for December
are due to be released.
At 10:00 am ET, Federal Reserve Chair Janet Yellen will testify
on the Semiannual Monetary Policy Report before the Senate Banking
Committee in Washington DC.
Eurozone finance ministers will meet in Brussels later in the
day.
The Chinese market continues to remain closed in observance of
the week-long Golden Week holidays and the Japanese banks are
closed in observance of the National Foundation Day holiday.
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