As I said yesterday the US dollar didn’t do much as it awaits today’s ECB meeting and tomorrows Non Farm Payrolls numbers. The foreign exchange market has positioned itself for stronger numbers – so any disappointment or even an “as expected” result may result a weaker US Dollar.
The Pound exchange rate performed yesterday as well as England did against Norway. The English team couldn’t even sell out Wembley – poor, very poor!!!
Scottish referendum dominates the news and the uncertainty is the problem here not really the result. We expect that as we get closer to D day the pound will suffer further. A No vote will see the pound soar and i guess a No vote will see it plummet.
Yesterday we also had very strong services PMI index which suggested that Q3 GDP is likely to remain on a strong tack in spite of the somewhat weaker manufacturing reading earlier this week.
Regardless the Pound will remain sensitive to any new polls, and is likely to struggle to recover as long as the referendum is perceived as a significant risk.
What will Draghi do – i think the ECB has little option to start dumping money from helicopters and turn the printing presses into overdrive. But, and a very big BUT it is – will German let him do “whatever it takes”. The biggest problem of a monetary union is that it needs all parties to be on level footing. Presently the Club Med countries are suffering and the Germans appear to be firing and want rate hikes. Quite clearly this isn’t going to work. We cant really see the Euro exchange rate benefiting from Super Marios comments as all he can do to help the Club Med countries is “jawbone” (talk) the currency down.