The euro is holding steady at around the $1.06 mark after dipping to a 12 year low of under $1.05 earlier in the week. Euro-dollar parity is within sight and a lot will depend on what the US Federal Reserve says tonight.
Peter O'Flanagan, Head of Trading with Clear Treasury in London, said the Fed looks to be the only central bank to raise rates in the near term. He said that while a rate rise as such tonight is not expected, what is expected is a removal of forward guidance and a signal of rate rises by the middle of the year. "That's where the market is expecting things to go and the dollar is reflecting that at the moment," he states.
Mr O'Flanagan said the signal of a rate hike by the Fed would likely bring the prospect of euro-dollar parity even closer. "The ECB is going in the opposite direction to the US Fed with QE. That's due to go on until September next year and is weakening the euro. It's down 25% to the dollar last summer and it could go further," he explained.
He also said he did not expect that the prospect of rate cuts in the US would add to a deflationary environment across the globe. "Deflation is already there. The Fed is the only central bank looking at increasing rates while all others are cutting or taking steps to ease policy. The ECB have been taking steps to to address the deflationary environment and action in the US won't impact on this. Euro zone equities are performing well and we expect this to continue," he said.
The Bank of England also publishes the minutes of its latest policy meeting today just hours ahead of chancellor George Osborne presenting his UK budget. "We'll be looking out for change in rhetoric. They could signal a cut in rates again should low inflation persist. That would be a turn around from last year when they were looking at rate increases. Low inflation has played a part here." On the UK budget, the analyst said there was an expectation of a voter-friendly presentation with the elections just six weeks away. "There have been certain leaks about a rise in the minimum wage and a possible upgrade in growth to 3% but a cut inflation expectations," he concluded.
MORNING BRIEFS - UTV Media has upgraded its expected losses from its UTV Ireland service to £6m for this year from an estimated £3m previously. This morning, the group reported operating profit for 2014 of £19.7m - down marginally on the £20.1m in 2013, but that figure includes £3m in start-up costs for UTV Ireland. Group revenue for the year came in at £116m up from £107.2m in 2013.
*** Facebook is adding a money transfer function to its Messenger service. US users will soon be able to link their Visa or MasterCard accounts to the app and send money to friends for free. It is seen as a challenge to payment providers such as PayPal and Square. Facebook says it currently processes more than 1 million transactions a day on its site, but that's expected to see a big surge in the coming quarters.
*** According to reports in the Wall Street Journal, Apple's TV service may soon become a reality. The iPhone maker is said to be in talks with programmers to offer a slimmed-down bundle of TV networks this autumn. The service would have about 25 channels which would be available across all Apple devices. The price of the service is expected to in the region of $30-40 a month.