US Dollar:
The dollar weakened slightly against the euro this morning as Asian traders sold their positions on the U.S currency to ensure profits were maintained following its overnight rise. Optimism that the global economy recovery was recovering also weighed down on the dollar, as investors looked to buy higher yielding assets. Positive Euro zone data lent further support, although there is some expectation that USD could find strength later in the day as U.S hedge funds could buy dollars in preparation for investor’s dollar-redemption requests that could increase due to the terms of their contracts.
Whilst the U.K recovery looks long and arduous, positive global data has on the whole encouraged investors to veer away from dollar investment, looking at other higher yielding currencies, such as the pound for a return. GBP also bounces back from rhetoric from Mervin King (BOE governer) as traders share the view that with positive Euro trade data and improved U.S data, the global economic recovery is well on the way and sterling could benefit further against the dollar. EUR/USD is currently in Euros favour at 1.4904, while GBP/USD has pushed up to 1.6660 currently.
Pound:
Sterling is trading up even higher after yesterday afternoon’s rally, shrugging off recent warnings from the Bank of England about the challenges facing the UK. Sterling is currently trading near the 1.12 mark against the Euro and nearly touched 1.67 against a weak USD in early morning trading. Sterling has recovered from lows created on Wednesday after the bank of England’s inflation report delivered prospects of a sustained period of historically low interest rates (0.5%) and that QE (money printing) will remain in place. This recovery has been aided by an increase in risk appetite amongst the markets and weakness in the USD and Euro with Euro-zone growth data coming in positive but under economists predictions. According to Goldman Sachs, “Tighter ECB policy would have an impact on risk sentiment and hence would likely lead to a weaker euro”.
There is no economic data due today for the UK giving sterling a chance to continue a small rally throughout the day before we hit fresh economic data next week. We start next week with the main inflation data, CPI on Tuesday, expected at 1.3%, somewhat off the target of 2%. We are also due retail price index data which highlights the change in the price of goods and services in the UK. We are then due the bank of England minutes the following day which will provide another snapshot into monetary policy and the vote numbers amongst the nine members. This is usually looked at closely, highlighting any division amongst the committee with reference to interest rates and QE and the reasons behind the last decision. Those wishing to avoid risk should consider “cashing in” on gains made by sterling before next week.
Euro:
The Euro was up against the Dollar this morning as weaker overnight positions were bought back by traders to realize profits. Generally Euro data has been positive, although German GDP up 0.7% didn’t quite match expectations of a 0.9% increase. French GDP similarly showed an increase of 0.3% but didn’t perform as strongly as expected. Whilst the Euro showed strength against the dollar this morning, this was probably due to traders selling off the dollar to look for riskier higher yielding currencies for investment on the back of positive trade data in Europe and elsewhere. Similarly, the pound strengthened across the board this morning including the Euro, as traders see the pound as a worthy investment following positive data that indicates global economic recovery is in full swing. GBP also bounced back against the Euro in the aftermath of the BOE comments as traders see a U.K recovery taking place sooner than forecast and dollar selling/ pound buying continues. GBP/EUR is currently in GBP favour at 1.1191, while EUR/USD holds at 1.4904.
Daily Quote
“Do not wait for ideal circumstances, nor the best opportunities; they will never come.” – Janet E. Stuart
