Philip Salter
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THE dollar’s strength in recent weeks has seen it really surge against its neighbour the Mexican peso, having appreciated some 14 per cent since mid-July. A break above the peso13.000 level is quite significant for the dollar bulls, meaning a test of peso14.000 cannot be ruled out. Capital Spreads quotes peso13.1270-peso13.1470 for dollar-Mexican peso.

We know the euro is struggling, but who knows how much more pain there is to come for the single currency? Italy’s downgrade by S&P adds it to the list of other Eurozone casualties. With the euro at a ten-year low against the yen, traders should brace themselves. Capital Spreads quotes ¥104.75-¥104.78 for euro-yen.

Much focus will be on the contents of the BoE minutes released today, where vote breakdowns are once again crucial. The UK economy has deteriorated significantly since last August’s inflation report, so the general view is that the BoE is likely to respond. Going into the publication of the minutes, expect speculative short sterling positions to grow in expectation of monetary easing. On sterling-dollar Alpari quotes $1.5713-$1.5714.

The minutes of the latest meeting of the Reserve Bank of Australia’s interest rate setting committee hinted that rates won’t be cut any time soon, helping the struggling Aussie in the short-term. However, spread betters are still banking on the currency falling back to parity with the US dollar and possibly falling further. The Aussie has fallen in recent months, not helped by similar falls in commodity prices. Spreadex quotes Australian dollar-dollar at $1.0286-$1.0289.

Given the event risk around the Fed and BoE this week, it may be a better approach to take advantage of pre-figure flows, rather than leave exposure over the figures themselves. There is a strong chance of sterling weakness going into the BoE minutes, but if they stay tight-lipped, sterling pairs could get squeezed if the BoE appears more hawkish than the ECB and Fed. On euro-sterling Alpari quotes £0.8616-£0.8618.