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Forex - Dollar firms vs euro, pound after Bernanke comments; yen gains
AFX


LONDON (Thomson Financial) - The dollar firmed against the euro and the pound after US Federal Reserve chairman Ben Bernanke offered some relief to markets by saying that the Fed 'stands ready' to take further action to provide market liquidity as necessary, The yen gained, however, as the currency benefited from ongoing safe haven flows after Bernanke stated that it is not the job of the Fed to rescue investors.

Speaking at the annual monetary policy symposium in Jackson Hole, Wyoming, Bernanke said financial markets can have economic effects 'felt by many outside the markets'. The Fed will 'act as needed to limit the adverse effects on the broader economy' that may arise from the recent turmoil on financial markets.

He warned, however, that it is 'not the responsibility of the Federal Reserve -- nor would it be appropriate -- to protect lenders and investors from the consequences of their financial decisions.'

At 3.17 pm BST, the euro was trading at 1.3637 usd, down from 1.3666 previously, while the pound fell to 2.0118 usd from 2.0163 previously.

Against the yen meanwhile, the dollar fell to 116.11 from 116.30.

Thomson IFR Markets analyst Rhonda Staskow said the remarks have two aspects to them - on the one hand it is positive for markets that the Fed is ready to provide more liquidity as necessary. However, the comment that it is not the Fed's jobs to protect lenders and investors will 'dampen the hope of those looking for the Fed to bail them out'.

'This has fuelled expectations that the impact of the credit crunch and housing crisis will continue in weeks to come,' she said.

jessica.mortimer@thomson.com

jkm/slj

Calendar updated for next week's fun and games -- don't forget Monday is Labor Day in the U.S. (when they don't -- labor, that is).

Bonjour mes amis.

Hols are now over unfortunately, although I'm pleased to report that I'm sans white bits. Have I missed anything this summer?

Looks to me like it's approaching crunch time for the Dollar over the next few weeks. I'll paste up a chart to show what I mean when I get some time this week.

These are the Dollar charts that I promised.

First, Dailies over the last 3 years.



Then zoomed in over the last 6 months with some indicators for good measure.

So what d'you reckon Hils? Or anyone else ...

I have a sneaky feeling that gold might have peaked this morning, and whilst there looks to be further overall weakness in the $ shorter term, there's going to be an almighty reversal.

Gotta dash, I'll post a thingie when I get back.

I don't have a view on anything further out than the 1- and 10-minute charts atm, Choccie.

gbp/usd 4hr chart. my view - looks like its up to me, but we've got a channel forming, and also triple divergence on macd so wouldnt surprise me if we dont see the recent top broken for a ...........? The daily looks up to me...........confusing aint it! Think hilary hit the spot, trade what you see atm

I was commenting on the longer term, gofe, with Hils' approaching $ crunch time in mind.

The way I see it, gold may or may not bust through down slopey resistance off last summer's high. And it's certainly giving it a good whack today.

Don't think it's a coincidence that EUR/$ is trying once again today to breach the high from December 2004.

Errrrrrrrr .......... Is it just me who can't access FX PowerCharts this morning? One PC produces a long string of source code where the applet should be, the other is just blank???????????

Had a problem with Netdania too, the java thingie took ages to load this morning, and it's been running very slowly since yesterday.

Intellichart is OK, Choccie.

Funnily enough, Sun Java prompted me to download an update this morning. That might be the cause of the problem. If it ain't broke, why do they try to fix it?????????

Cheers Hils, I'll have a look at Intellichart cos I need to find another source for $ index, as Netdania have removed it from the list for some reason.

I haven't noticed any java prompts? :S

Just had a quick check and Powercharts here OK Hils, but this is on a machine I don't use for powercharts normally, so no user settings present - and no java update prompt yet.

Hil: The thing you need to learn about software is that it's always broke. It's considered polite to fix it when people find out.

MM (California)

PS: thanks for updating the Calendar for me ;-)

Anyone trading this evening? :)

Just passing the time ...

Lawmakers Push for Immediate Disclosure of BOE Votes on Rates

By Jennifer Ryan

Sept. 18 (Bloomberg) -- The Bank of England should say how policy makers voted on interest rates the day of the decision rather than two weeks later when minutes of the meeting are published, U.K. lawmakers said.

Providing more information sooner about decisions may help limit market volatility when policy makers make an unexpected move, the Treasury Committee in the House of Commons said in a report assessing the bank's performance over the past 10 years. The lawmakers from all political parties said they would like to avoid the kind of market swings that occurred after the surprise rate increase in January.

``The system at the moment seems to encourage two weeks of greater uncertainty than is necessary,'' John McFall, a member of Parliament from the ruling Labour Party, said in a statement in London today. McFall heads the Treasury committee.

The implied rate on the March futures contract jumped 19 basis points to 5.7 percent on Jan. 11, the day the bank surprised markets with an a quarter-point increase in its key rate to 5.25 percent. The implied rate slipped 6 basis points after minutes published Jan. 24 showed the decision was approved in a 5-4 vote, the first time since 2000 that so many bank officials voted against Governor Mervyn King.

The contract settled to the three-month London interbank offered rate for the pound, which averaged about 15 basis points more than the central bank benchmark for the past decade. A basis point is 0.01 percentage point.

Discussing Votes

The report also recommended that the minutes of the central bank's rate-setting Monetary Policy Committee meeting should identify individual members' views. They should also testify to the Treasury Committee once a year about their voting record and give their own outlook on economic issues, the report said.

Naming members in the minutes would hold them ``accountable for their views, and this will help explain their votes,'' McFall said.

Lawmakers backed the bank's inflation target, where consumer price gains of more than a percentage point above or below 2 percent require the governor to write an open letter of explanation to the chancellor of the exchequer.

Inflation slipped to 1.9 percent in July, the first reading below the target in 16 months. The range around the target has been breached once in the past decade, when the rate touched 3.1 percent in March.

While the central bank deserves ``a significant amount of credit'' for the low rates of inflation over the past decade, there is ``a need for more information to be provided by the Monetary Policy Committee to aid both the financial markets and the general public,'' the report said.

To contact the reporter on this story: Jennifer Ryan in London at Jryan13@bloomberg.net

U.K. Inflation Rate Falls to Lowest Since March 2006 (Update3)

By Brian Swint

Sept. 18 (Bloomberg) -- The U.K.'s inflation rate unexpectedly fell last month to the lowest level since March 2006, giving the Bank of England scope to reduce interest rates in response to any worsening of the credit-market rout.

Consumer prices rose 1.8 percent from a year earlier compared with 1.9 percent in July, the Office for National Statistics said today in London. Economists expected the rate to be unchanged, according to the median of 35 forecasts in a Bloomberg News survey. Inflation has slowed from a decade-high of 3.1 percent in March. Prices rose 0.4 percent compared with July.

The Bank of England, which signaled a month ago its benchmark interest rate may have to rise to curb inflation, is now facing an economy under threat from higher credit costs. Consumers are shouldering a record 1.3 trillion pounds ($2.6 trillion) in debt, a decade-long housing boom is cooling and the bank was last week forced to bail out mortgage lender Northern Rock Plc.

``The inflation picture has improved substantially over recent months,'' said George Buckley, chief U.K. economist at Deutsche Bank AG in London. ``With the crisis in the financial markets persisting, interest rates may well be cut earlier in 2008 than we expect.''

To ease a surge in overnight borrowing costs, the Bank of England today made 4.4 billion pounds in emergency funds to U.K. banks. The London interbank offered rate that banks charge each other for overnight loans in pounds dropped 33 basis points to 6.47 percent after the move.

Slower Growth?

The collapse of subprime mortgages in the U.S. has prompted lenders to hold back on loans to all but the safest borrowers. Customers of Northern Rock, the U.K.'s third-largest home-loan provider, today queued for a fourth day to withdraw their savings.

Slower inflation means the Bank of England may have scope to cut its benchmark rate from 5.75 percent if the credit rout continues. The central bank said Sept. 6 it expects inflation to stay around its 2 percent target in coming months, and Governor Mervyn King said six days later the turmoil may curb consumer prices and hurt economic growth.

The housing market is also showing signs of slowing. London house prices dropped the most in three years this month, a report from Rightmove Plc on Sept. 14 showed.

Reductions in mortgage exit fees and clothing prices led the slowdown in inflation, the statistics office said. Financial services costs declined 3 percent from a year earlier and prices in the clothing and footwear category dropped 3.5 percent. Food and beverage costs climbed 3 percent and an increase in ticket prices for live music and theater also spurred inflation.

Off the Agenda

The pound declined and traded at $1.9909 at 12:30 p.m. in London compared with $1.9950 before the report.

``A rate rise is now off the agenda,'' said Ross Walker, an economist at Royal Bank of Scotland Group Plc in London. ``Inflation numbers should be helpful for the next few months.''

The Bank of England has so far proved itself more reluctant than the European Central Bank or the U.S. Federal Reserve to take action against the market slump.

The Fed may cut its benchmark rate by a quarter percentage point to 5 percent later today, a Bloomberg News survey showed, and the ECB has held seven special cash auctions for banks since Aug. 9. The U.K. central bank announced its second such move today.

Investors have responded to the market slump by slashing forecasts for the bank's benchmark rate. The implied rate on the June futures contract was 5.55 percent today, down from 5.84 percent a month ago. The contract settles to the three-month London interbank offered rate for the pound.

Next Move

``I really struggle to find a reason why the Bank of England could possibly hike again,'' Rob Carnell, an economist at ING Wholesale Banking, said in an interview. ``The next move will be a rate cut.''

Bank of England policy makers are nevertheless still concerned economic growth will allow companies to raise prices. The economy will expand 2.9 percent in 2007, the most in three years, the International Monetary Fund predicted July 25.

The retail price index, a gauge used by labor unions when making wage demands, rose 4.1 percent in August from a year earlier, the statistics office said today.

Raw material costs are also rising. Oil prices climbed to a record $81.24 a barrel today and global wheat prices surpassed $9 a bushel for the first time last month.

Premier Foods Plc, the U.K.'s biggest producer of cakes and instant soup, said Sept. 4 it sees a ``substantial inflationary environment on food.''

Yields on U.K. inflation-protected bonds suggest traders expect inflation in Europe's second-largest economy to accelerate. The yield on inflation-indexed debt due in 30 years was 3.48 percentage points lower than that on 30-year gilts today, a gap that represents the rate of inflation investors expect over the life of the securities.

``There are a lot of upstream price pressures,'' said Alan Clarke, an economist at BNP Paribas SA in London. ``But we see the bank lowering rates once the inflation risks are squeezed out.''

To contact the reporter on this story: Brian Swint in London at bswint@bloomberg.net .

I do miss Mels!

U.S. Federal Open Market Committee Statement: Text

By Washington newsroom +1-202-624-1820

Sept. 18 (Bloomberg) -- The following is the full text of the statement released today by the Federal Reserve:

The Federal Open Market Committee decided today to lower its target for the federal funds rate 50 basis points to 4 3/4 percent.

Economic growth was moderate during the first half of the year, but the tightening of credit conditions has the potential to intensify the housing correction and to restrain economic growth more generally. Today's action is intended to help forestall some of the adverse effects on the broader economy that might otherwise arise from the disruptions in financial markets and to promote moderate growth over time.

Readings on core inflation have improved modestly this year. However, the Committee judges that some inflation risks remain, and it will continue to monitor inflation developments carefully.

Developments in financial markets since the Committee's last regular meeting have increased the uncertainty surrounding the economic outlook. The Committee will continue to assess the effects of these and other developments on economic prospects and will act as needed to foster price stability and sustainable economic growth.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; Timothy F. Geithner, Vice Chairman; Thomas M. Hoenig; Donald L. Kohn; Randall S. Kroszner; Frederic S. Mishkin; Charles L. Evans; William Poole; Eric S. Rosengren; and Kevin M. Warsh.

In a related action, the Board of Governors unanimously approved a 50 basis point decrease in the discount rate to 5 1/4 percent. In taking this action, the Board approved the requests submitted by the Boards of Directors of the Federal Reserve banks of Boston, New York, Cleveland, St. Louis, Minneapolis, Kansas City and San Francisco.

Its all in the price Choccie .... Limpy told me :-)