The British pound slumped on Friday for the second day in a row versus the greenback as investors’ concerns over the U.K. banking industry increased following the press report that Lloyds Banking Group was looking for alternatives to the Government’s asset protection scheme. Sterling started to decline from an intra-day high of 1.6454 in Australia to as low as 1.6230 in late New York afternoon, cross selling versus euro also weighed on the pound as eur/gbp rallied to a multi-month high of 0.9058. In addition, Britain posted a record budget deficit in August, the U.K. public sector net cash requirement came out at 10.4 billion pounds in August, sending it to be a record for the month of August.
Euro fell briefly to 1.4648 in European morning against the dollar partly due to short-covering in dollar. However, buying interest on dips lifted euro in New York afternoon as a rise in U.S. shares encouraged investors to buy in risky assets. Earlier, German PPI came out higher than expected at 0.5% compared to economists’ consensus of 0.2% and a reading of 1.5% drop from prior month. The dollar index, which measures the dollar’s value against a basket of six major currency bounced off one-year low of 76.010 made on Thursday and closed at 76.449 on Friday.
U.S. President Obama will chair the G-20 Summit on September 24-25 next week in Pittsburgh, Pennsylvania. At this summit, the leaders will review the progress made since the Washington and London Summits and they are expected to agree to coordinate rhetoric on exit strategies. However, interest rates, monetary policy and the role of dollar will not be discussed at this summit.
Monday to Wednesday will be a holiday in Japan. Data to be released next week include U.K. Rightmove house price, U.S leading indicators on Monday, New Zealand current account, Switzerland trade balance, Canada retail sales, U.S. home price index on Tuesday, New Zealand GDP, German and eurozone service and manufacturing PMI, U.K. BoE meeting minutes and vote outcome, eurozone industrial orders, U.S. Fed rate decision on Wednesday, Japan trade balance, all industry index, German Ifo, U.S. jobless claims, existing home sales on Thursday, New Zealand trade balance, Japan BoJ minutes, CSPI index, U.S. durable goods, University of Michigan survey, U.S. new home sales and building permits on Friday.