The Sterling Advances Against The Dollar As Stocks Advance

The pound climbed for a third day against the dollar, as the longest run of stock gains in two months underpinned demand for the British currency. However gains by the pound may be limited as an industry report showed house prices slid almost 15 percent in the year and a Bank of England policy maker David Blanchflower said interest rates need to fall 'significantly.' 'Interest rates do need to come down significantly - and quickly,' Blanchflower said in a speech at the University of Kent in Canterbury, England, yesterday. 'If rates are not cut aggressively we do face the prospect of a relatively deep and long-lasting recession.' The GBP/USD is currently trading at $1.6580 as of 8:41am, GMT.

The dollar and the yen fell as a wave of global interest-rate cuts sparked a rally in Asian stocks, bolstering demand for higher-yielding assets. The greenback slid for a third day against the euro after the Federal Reserve reduced its target lending rate to the lowest in half a century. The yen dropped to a one-week low versus the European currency on speculation the Bank of Japan will lower borrowing costs when it meets tomorrow. 'The significant easing of monetary policy will help the global growth outlook,' said Tony Morriss, a senior currency strategist at Australia & New Zealand Banking Group in Sydney. 'We're seeing a major correction of the U.S. dollar and Japanese yen. They were among the key beneficiaries of the flight to quality that's being unwound.' The USD/JPY is currently trading at 98.35 as of 8:50am, GMT.

The dollar could rise to parity with the euro in 2009 as the European Central Bank cuts interest rates and market volatility prompts U.S. investors to repatriate funds and hedge their currency risks. Given the increased volatility in currency and equity markets, 'the need for U.S. equity managers to think about their currency risk in a more systematic way is rising fast,' wrote Metcalfe. 'Following both repatriation and hedging flows at present, suggests that U.S. dollar strength is set to continue.' The EUR/USD is currently trading at $1.6559 as 9:06am, GMT

Economic Calendar

Time (GMT)	E Event	Currency	Period	Previous
23:30	Household Spending y/y	JPY	Sep	-4.0%
23:30	Core CPI y/y	JPY	Oct	1.7%
23:30	Unemployment Rate	JPY	Sep	4.2%
23:15	Manufacturing PMI	JPY	Oct	44.3
12:30	GDP q/q	USD	Quarterly	2.8%
12:30	Jobless claims	USD	Weekly	478.0K
10:00	Consumer Confidence	EUR	Oct	-19
09:00	Unemployment Rate	EUR	Oct	7.6%