The Ticker / Dollar, euro surge further following Bank of Israel’s rate cut

Both the U.S. dollar and the euro strengthened further against the shekel on Tuesday after the Bank of Israel announced a cut to its base interest rate on Monday from 0.25% to 0.1%, carried out in part to lower the value of the shekel. Tuesday, the representative rate of the dollar was set at 3.952 shekels, up 2.44% on the day, while the euro rate was set at 4.478 shekels, a rise of 2.68%. Israeli export firms regularly push for steps to undercut the strength of the shekel to make exports more competitive. Israel Discount Bank economist NIra Shamir commented that strength of the shekel has been based on “strong fundamentals” including accelerated economic activity in Israel, adding the Israeli currency is expected to rise in value in the future, but she said, “The Bank of Israel is signaling that it is prepared to join the global currency wars,” referring to competition among countries to devalue their currencies. (Dror Reich)

Teva announces success in test of new drug chronic migraine drug

Teva Pharmaceutical Industries announced on Tuesday that it has obtained positive results from a study evaluating doses of TEV-48125, a drug the Jerusalem-based company is developing for the treatment of chronic migraines, defined as migraines occurring on at least 15 days per month. The study revealed what Teva called “a significant and clinically relevant reduction” in headaches. “Chronic migraine is a challenging, complex and highly debilitating condition that desperately needs effective new treatment options,” said Michael Hayden, Teva’s President of Global R&D and Chief Scientific Officer. The World Health Organization ranked chronic migraines No. 4 in its list of debilitating conditions. In the United States alone, 3.2 million people, most of them women, suffer from chronic migraine headaches. (Yoram Gabison)

Allot Communications to acquire operations of Madrid-based Optenet

Hod Hasharon-based Allot Communications, which develops Internet traffic software systems to optimize broadband and added value services, has agreed to acquire the operations of Optenet, a Madrid-based provider of information security services, for $ 6.5 million in cash and an additional sum of up to $ 26 million, tied to performances benchmarks over a five-year period. The maximum $ 26 million payment would only kick in if Optenet generated at least $ 140 million in sales over the period. Allot expects the transaction to close by the end of next month, and sees the purchase of Optenet’s operations as a way to substantially broaden its information security business from cellular communications companies. Optenet was founded in 1997. It has a staff of 150 and has a customer base of 140,000, including Deutsche Telekom, O2, Orange and Vodafone. (Yoram Gabison)

TASE retreats from record high, energy stocks slide over antitrust decision

Shares on the Tel Aviv exchange generally declined in trading on Tuesday. The benchmark Tel Aviv-25 index was off by 0.15% to 1,501.15 points, retreating from the all-time high that it reached on Monday, while the Tel Aviv-100 declined by just 0.03% on Tuesday to 1,326.86. Trading volume on the day was 1.38 billion shekels ($ 349 million). The Oil and Gas index declined by 3.7% against the backdrop of news that Antitrust Commissioner David Gilo would defer a decision by two months on breaking up the gas monopoly that controls most of the country’s offshore natural gas reserves. (See additional coverage on this page). Shares in stakeholders in the offshore fields declined on the news, including Avner Oil Exploration, shares of which were off by 5.2%, Ratio Oil Exploration, which declined by 4.4%, and Delek Drilling, which lost 4%. In other developments of note, on Tuesday morning Whitesmoke Software released a shelf prospectus that would have it raise 10 million shekels through the sale of shares. (Dror Reich)

Goldman Sachs eyes sterling surge to 15-year highs against the euro

The exchange rate follows the divergence in Interest rates

On an inverted basis, UK exchange rate would be €1.54 to the pound by 2017. This turn would Europe into a cheap region for holidays once again, and offer bargain basement prices for farmhouses in Tuscany or Acquitaine.

Yet such a dramatic rise in sterling cannot easily be justified by the underlying weakness of the British economy, which already has the worst current account deficit in the developed world. It was running at 5.2pc of GDP in the second quarter.

While part of this deficit is due to the economic relapse in the eurozone, it also suggests that the exchange rate is badly overvalued even at current levels. The International Monetary Fund estimates that the pound is 5pc to 10pc too strong.

Cumulative inflation in the UK has been much higher than in the eurozone, without any improvement in relative productivity. A return to the euro-sterling exchange rate of fifteen years ago would imply a massive overvaluation, and could push the UK deficit towards 7pc of GDP.

Euro/Sterling rate for the last 20 years

“The current account deficit is probably the worst in history,” said David Bloom from HSBC. “We have only three problems with sterling: cyclical, structural, and political; and we don’t really believe in this recovery.”

“We think that whatever infects the eurozone also infects Britian. They feed into each other and that is why we think sterling will go down with the euro. The dollar is the only rose between these two thorns,” he said.

The Goldman Sachs forecasts were contained in its predictions for 2015, a list that includes a “New Oil Order” as extra crude supply from Libya, Iraq, and Iran pushes prices even lower.

The bank said the US Federal Reserve will not raise rates until September of next year, later than the markets expect. But it will then move faster and on a steeper trajectory than widely assumed as it tries return to a “neutral” rate of 4pc. The report insists that this will be “manageable” for the world, invoking the curious argument that bond tapering has so far been benign and that Fed tightening will therefore will continue to be so in the future.

The analysis of Fed policy almost certainly reflects the broad outlook of William Dudley, a Goldman Sachs econmist before he became head of the New York Fed. He is one of the most influential figures on the voting committee. Mr Dudley’s views have tended to prevail over recent meetings and are tracked closely by analysts.

The latest Fed minutes played down concerns about the strength of the dollar, suggesting that the closed nature of the US economy makes it resilient against an exchange rate shock.

Goldman Sachs said the US economic expansion has “several years to run” and will drive another long phase of global growth.

The S&P 500 index of Wall Street stocks will rise to 2,300 by 2017, the Stoxx Europe 600 index will rise to 440, and the Japanese Topix wil hit 1,900, so bask in sunlit uplands and enjoy. Gold will go nowhere.

Goldman Sachs eyes sterling surge to 15-year high against the euro

We are in a “multi-year phase of a US dollar recovery” and markets are underestimating the power of the trend

Sterling is to climb relentlessly against the euro over the next three years and will reach levels last seen at the turn of the century, according to new forecasts by Goldman Sachs (NYSE: GS-PB – news) .

The US investment bank said the dollar will rise even faster as the American economy powers ahead and interest rates rise steeply, touching parity against the euro and climbing to 140 Japanese yen. The Brazilian real will tumble to 3.10 as the commodity boom continues to deflate.

“We are in a multi-year phase of a US dollar recovery. The market may be underestimating the scope and persistence of that trend,” it said.

The euro will drop to 0.65 against the pound by 2017, driven by capital inflows rather than trade effects. This approaches levels seen in the period from 2000-2002 when Germany’s economy fell into a deep slump and the Neuer Markt for hi-tech stocks collapsed. This is a dramatic revision since the bank’s previous forecast was 0.85. “Euro downside remains our top conviction view,” it said.

Goldman Sachs said the European Central Bank is still reluctant to buy sovereign bonds and launch full-blown quantitative easing but is likely to act more aggressively than markets expect when it finally does.

The exchange rate follows the divergence in Interest rates

On an inverted basis, UK exchange rate would be €1.54 to the pound by 2017. This turn would Europe into a cheap region for holidays once again, and offer bargain basement prices for farmhouses in Tuscany or Acquitaine.

Yet such a dramatic rise in sterling cannot easily be justified by the underlying weakness of the British economy, which already has the worst current account deficit in the developed world. It was running at 5.2pc of GDP in the second quarter.

While part of this deficit is due to the economic relapse in the eurozone, it also suggests that the exchange rate is badly overvalued even at current levels. The International Monetary Fund estimates that the pound is 5pc to 10pc too strong.

Cumulative inflation in the UK has been much higher than in the eurozone, without any improvement in relative productivity. A return to the euro-sterling exchange rate of fifteen years ago would imply a massive overvaluation, and could push the UK deficit towards 7pc of GDP.

Euro/Sterling rate for the last 20 years

“The current account deficit is probably the worst in history,” said David Bloom from HSBC. “We have only three problems with sterling: cyclical, structural, and political; and we don’t really believe in this recovery.”

“We think that whatever infects the eurozone also infects Britian. They feed into each other and that is why we think sterling will go down with the euro. The dollar is the only rose between these two thorns,” he said.

The Goldman Sachs (Xetra: 920332 – news) forecasts were contained in its predictions for 2015, a list that includes a “New Oil Order” as extra crude supply from Libya, Iraq, and Iran pushes prices even lower.

The bank said the US Federal Reserve will not raise rates until September of next year, later than the markets expect. But it will then move faster and on a steeper trajectory than widely assumed as it tries return to a “neutral” rate of 4pc. The report insists that this will be “manageable” for the world, invoking the curious argument that bond tapering has so far been benign and that Fed tightening will therefore will continue to be so in the future.

The analysis of Fed policy almost certainly reflects the broad outlook of William Dudley, a Goldman Sachs econmist before he became head of the New York Fed. He is one of the most influential figures on the voting committee. Mr Dudley’s views have tended to prevail over recent meetings and are tracked closely by analysts. The latest Fed minutes played down concerns about the strength of the dollar, suggesting that the closed nature of the US economy makes it resilient against an exchange rate shock.

Goldman Sachs said the US economic expansion has “several years to run” and will drive another long phase of global growth.

The S&P 500 index of Wall Street stocks will rise to 2,300 by 2017, the Stoxx Europe 600 index will rise to 440, and the Japanese Topix wil hit 1,900, so bask in sunlit uplands and enjoy. Gold will go nowhere.

Sterling hits one-year high vs euro on UK jobs surge

By Laurence Fletcher

LONDON, Jan 22 (Reuters) – Sterling rallied on Wednesday after a sharp drop in the UK’s unemployment rate saw investors bring forward expectations of when the Bank of England may start to raise interest rates.

The euro fell to a one-year low against sterling of 81.81 pence after the report, from 82.26 pence beforehand, leaving it down 0.6 percent on the day.

The pound jumped to $ 1.6580, its highest in almost three weeks, from $ 1.6464. Volumes rose sharply in both pairs after the data.

Near-term resistance is at $ 1.6605, the high struck on Jan. 2, a rise above that will take the pound to a near 2-1/2 year high. Sterling also surged against the yen and the Swiss franc after the jobs report.

The UK’s unemployment rate fell to 7.1 percent in November from 7.4 percent. Analysts had been expecting it to fall to 7.3 percent.

The Bank of England said in minutes from its Monetary Policy Committee’s latest rate-setting meeting that unemployment would reach its 7 percent threshold, when it will start to consider rate rises, “materially earlier than previously expected”.

But the Bank also said it saw “no immediate need” to raise rates.

That assurance failed to make a dent on sterling bulls.

“The fall in unemployment has got the market more excited about raising rates this year,” said Jane Foley, a senior currency strategist at Rabobank.

“(But) I’d imagine the MPC (KOSDAQ: 050540.KQ – news) will push back against that in February, either by playing down the importance of the 7 percent threshold or lowering it.”

SOLID SUPPORT

UK money markets, as highlighted by the sterling overnight interbank average, are edging towards pricing in the chance of an interest rate rise in 11 months’ time, compared with in a year’s time on Tuesday.

Markets now see a 60 percent chance of a rate hike in 18 months’ time.

The jump in sterling will provide a welcome boost for hedge funds, many of which have been betting on a rise in sterling.

Rabobank’s Foley said that while the pound is “well supported” by the data, it may start to fall ahead of the Bank’s February inflation report.

“Cable is close to its highs around about there,” she said. Cable is the sterling-dollar rate.

In August, the BoE (Shenzhen: 000725.SZ – news) said it would not raise interest rates until unemployment fell to 7 percent, something it forecast would take at least three years.

Sterling has been the surprise performer over the past six months as the UK’s economic recovery has taken hold, raising the prospect of interest rate hikes, although the pressure to do so was eased as CPI (Other OTC: CPICQ – news) inflation fell back to the Bank of England’s target in December.

“The UK will be the first to raise rates amongst the major developed economies,” said Neil Jones, head of hedge fund FX sales at Mizuho. “Sterling will continue to outperform.”

Sterling’s rise against the euro was helped by a widening yield differential between 10-year British and German government bonds, which reached its highest in more than eight years on Wednesday after the data.

“Expectations of a hike next year will continue to make sterling look attractive, particularly against the euro which could still see monetary policy eased due to very low inflation,” said Andy Scott, associate director of FX advisory services at HiFX.

FOREX-Pound, Aussie surge on rate expectations, euro steadies

* UK jobs data drive sterling higher

* Australian dollar jumps as inflation pares rate-cut risk

* Yen briefly blips higher after BOJ stands pat as expected

* Bank of Canada meets after rough month for Canadian dollar

By Patrick Graham

LONDON, Jan 22 (Reuters) – Sterling and the Australian dollar both surged on Wednesday after data releases that spoke for a tighter approach to monetary policy despite doubts over the solidity of growth in both economies.

UK unemployment slid to within a whisker of the level at which the Bank of England has said it might consider a rise in interest rates, driving sterling – the best performing major currency of the past six months – another half a percent higher against both the euro and dollar.

The largest quarterly rise in inflation in over two years meanwhile put paid to expectations of further cuts in rates in Australia and helped the Aussie gain almost 1 percent, all but erasing this year’s losses.

Regardless of another warning by the UK central bank that it is in no hurry to raise rates which have been at rock bottom since 2008, the jobless figures added to a growth picture that is far brighter than most of mainland Europe.

“In essence what we have is a developing picture of disinflationary growth which is improving the return on sterling,” said Peter Kinsella, currency strategist at Commerzbank (Xetra: CBK100 – news) in London.

“Euro-sterling has broken through some pretty important barriers and I think it (the pound) will continue to outperform this quarter.”

While there are more doubts about the UK currency’s ability to progress against the dollar, a break above $ 1.6540 also left this year’s highs around $ 1.66 in question.

“(An attempt on) 1.66 is entirely possible but unlikely to be sustained,” Kinsella said.

There was also some help in morning trade for the euro in the form of heavy bids for a Spanish debt sale, helping the single currency recover to trade steady at $ 1.3554.

AUSSIE HIKE

The Aussie had stolen the spotlight in early trade, rallying against its U.S. counterpart after an unexpected spike in inflation led investors to cut back bets on another interest rate cut.

The Australian and Canadian dollars are seen weakening in 2014 despite an improving global economy, with their prospects likely to be tied more closely to shifts in monetary policy at home than demand for their commodity exports.

But a number of analysts said the inflation numbers hinted that the Australian central bank’s next move might be to raise rather than cut rates.

“The market had been pricing in a 30-40 percent change of more cuts in rates and that has really been ruled out,” said Michael Sneyd, strategist with BNP Paribas (Milan: BNP.MI – news) in London. “There may even now be scope for the market to think about the RBA hiking rates.”

Most of the action in major currencies this year has come from outside the big three of the dollar, yen and euro in the absence of much new direction on monetary policy by their respective central banks.

The BOJ clung to its upbeat consumer inflation forecasts on Wednesday, encouraged by signs of a broadening recovery that may nudge firms into spending more on wages and investment.

Euro zone jobless at record high as retail sales surge

It comes after data published Tuesday revealed that inflation in the euro zone came in lower than expected in December, adding to concerns that the euro zone could be heading towards a period of deflation.

Consumer prices rose by 0.8 percent year-on-year in December, below the 0.9 percent expected by economists and close to October’s 47-month low of 0.7 percent which spurred the European Central Bank (ECB) to cut its main interest rate.

On Thursday, the ECB will announce its latest monetary policy decision – and although the majority of economists are not expecting the central bank to act this month, inflation figures could lead to calls for more stimulus in 2014.

(Read more: ECB unlikely to deploy its artillery, but pressure grows)

There are, however, signs that economic recovery in the euro zone is gathering pace. On Monday, data revealed that services and manufacturing activity in the region expanded in December. The Markit composite purchasing managers’ index (PMI) data showed that activity in the sectors rose to 52.1 in December, up from 51.7 in the previous month.

But economists were quick to point out that although the region as a whole appeared to be doing well, growth in the sectors was again uneven on a regional level.

Germany, Ireland and Spain’s PMIs, for example, all came in well above the 50-point mark indicates expansion. But France’s negative trend accelerated in December, with services and manufacturing activity hitting a seven-month low.

Follow us on Twitter: @CNBCWorld

euro rate – Yahoo News Search Results

GLOBAL MARKETS-Treasury yield surge, Wall St down on Fed taper views

* GDP, jobless claims raise expectations of Fed taper

* Euro at 1-month high vs dollar after ECB holds rate steady

* European shares end down on Fed views, deflation fears

By Barani Krishnan

NEW YORK, Dec 5 (Reuters) – Treasury yields hit three-monthhighs and U.S. stocks edged lower on Thursday, under pressurefor a fifth day, as robust data on the economy and the labormarket raised expectations of an imminent cutback by the FederalReserve of its stimulus.

With the all-important U.S. jobs report for November a dayaway, most markets were thinly traded as investors awaited whatthey hoped would be the clearest sign yet on when the Fed wouldbegin tapering its monthly purchases of $ 85 billion inTreasuries and mortgage-backed securities.

The euro rose to a one-month high against the dollar afterthe European Central Bank left a key interest rate unchanged,disappointing some traders who had hoped for more aggressiveeasing measures in the euro zone.

In the forex market, the ECB meeting overshadowed the strongU.S. data.

European stocks hit seven-week lows as investors frettedabout the risk of deflation in the euro zone and as the U.S.data fed expectations that the Fed will taper its bondpurchases.

The benchmark 10-year U.S. Treasury note was down 6/32 inprice, with its yield at a three-month high of 2.8625 percent.

“There are still people interpreting that the door is stillopen for a December taper” by the Fed, said Sean Murphy, aTreasuries trader at Societe Generale in New York. The Fed willmeet on Dec. 17-18, its last policy meeting of the year.

The U.S. government reported that initial claims forunemployment benefits dropped to 298,000, declining for a thirdstraight week and below expectations for a rise to 325,000.

In another sign of strength in the economy, the CommerceDepartment said gross domestic product grew at an annualized 3.6percent rate in the third quarter, the fastest pace since thefirst quarter of 2012. The growth was a sharp revision from the2.8 percent pace reported earlier and well above expectations byeconomists polled by Reuters for growth of 3.0 percent.

Atlanta Fed President Dennis Lockhart downplayed the GDPnumber in a speech to bankers and business people on Thursday.”The strong third quarter doesn’t make a trend and … doesn’tdrive me to the conclusion that we’ve had a breakout in terms ofgrowth,” he said, citing “pretty low” ongoing estimates forfourth-quarter growth.

Other data offered a less rosy picture of the economy. Neworders for factory goods fell 0.9 percent in October after a 1.8percent rise in the prior month as demand for aircraft andcapital goods weakened, suggesting some cooling inmanufacturing.

World stocks as indicated by the MSCI slipped after Japan’sNikkei index had its second sharpest fall for the week. Gold,whose gains, like stocks’, have been heavily on the Fed’sstimulus over the past three years, also tumbled.

The Dow Jones industrial average was down 58.89points, or 0.37 percent, at 15,830.88. The Standard & Poor’s 500Index was down 7.35 points, or 0.41 percent, at 1,785.46.The Nasdaq Composite Index was down 9.81 points, or 0.24percent, at 4,028.19.

The benchmark 10-year U.S. Treasury note was down 6/32 inprice, with its yield at a three-month high of 2.8625 percent.

The euro rose 0.2 percent to $ 1.3622 EUR=, having climbed ashigh as $ 1.3650, according to Reuters data, the strongest sincethe end of October. Benchmark German government bond yields stabilized after hitting a six-week high on therise in U.S. yields.

The ECB held its key interest rate at 0.25 percent at itslast policy meeting of the year, choosing not to follow throughon November’s surprise cut.

ECB President Mario Draghi said euro zone inflation willstay well below target for the next two years and the ECB isready to act if necessary to lift a listless economy.

“Clearly, they didn’t make a move. They just brieflydiscussed the negative deposit rate and that was the real key,”said Chris Tevere, senior currency strategist at Forex.com inNew York. “Some people were pricing in that maybe they cut ratesa little bit further and maybe they move to that before the endof the year.

“More importantly, it also doesn’t look like it’s in theimminent future either.”

The pan-European FTSEEurofirst 300 closed down 0.9percent at 1,262.18 points.

After suffering its biggest one-day fall in six weeks onWednesday, the Nikkei ended down 1.5 percent, retreatingfurther from this week’s six-year closing high.

Still, theJapanese bourse is up 8 percent since early November, and 46percent on the year so far.

The dollar faded to below 103.00 yen, givinginvestors an excuse to book profits on the market’s gains.

Elsewhere in forex, the Canadian dollar sagged to3-1/2-year lows after the Bank of Canada issued a dovish policystatement, highlighting the risks of weakening inflation.

In commodities, spot gold edged back to below $ 1,233an ounce, giving up some of Wednesday’s 1.7 percent rally.

U.S. crude added 66 cents to $ 97.85, on top of a 1.2percent rally on Wednesday after data showed domestic crudestocks fell by 5.6 million barrels, snapping 10 straight weeksof builds. Brent crude hovered at $ 111.75.

euro rate – Yahoo News Search Results