US Dollar:
The dollar is currently trading in tight ranges as traders consolidate ahead of the three day weekend in Japan and U.S Thanksgiving Holiday. There was still movement however as traders speculation on the strength and recovery time of the global economy swung back into the negative this morning, prompting investors to pull out of the euro and yen and put their money back into the safe-haven less riskier dollar. Wednesday’s weak U.S housing data and other softer economic data lent support to this view. Risk appetite remains sensitive in this climate and poor data or government official’s comments could swing the dollar either way. Currently it seems many traders are consolidating on gains they have made on the currency markets, being cautious about taking any more risk before the year’s end. Eyes will be the comments of Axel Weber, head of the German Bundesbank, and ECB President Jean-Claude Trichet as they speak at a conference later today discussing exit strategies from the recession. EUR/USD trading in tight ranges, currently 1.49, while the dollar finds strength against sterling as GBP/USD is currently 1.6602.
Pound:
Sterling is trading lower once again this morning to the bottom end of 1.66 against the USD and 1.11 against the Euro. UK economic data released yesterday morning failed to give sterling further support bringing the market back to reality with regard to the economic climate in the UK. Investors exited riskier assets including the pound and equities favouring the USD after public sector net borrowing (government spending) came in £4.7Bn higher than forecast at £11.4Bn. This data was a record for the month and highlights the severity of the situation when you see for the same time last year the amount stood at £100m.
We also had the release of retail sales data which showed an increase from last month’s flat figure to 0.4% but still came in under to 0.6% forecast, reducing the chance of a higher revised GDP (growth) figure out next week. In other news (sorry someone has turned the negative tap on!) according to an economic think tank even if the UK reduces its deficit in line with other leading economies it will still have the biggest deficit from now until 2017 casting more doubt on the credibility of our economy. There is no doubt in my mind that sterling is likely to come under renewed pressure leading up to the end of the year as investors re-evaluate their positions.
The next economic data release for the UK is on Tuesday next week when mortgage approval and business investment data is released leaving sterling at risk of trading lower in the interim.
Euro:
Falling Asian share prices prompted traders to sell the euro and buy the safe-haven dollar, weakening the single currency this morning against the dollar and yen. Japanese exporters also sold of the euro to settle accounts, contributing to further weakness in the unit. The Organization for Economic Cooperation and Development said growth in Europe had returned earlier than expected but warned that the recovery would be slow and could be undermined by financial sector instability and unemployment. Riskier sentiments such as these often prompt investors to pull out of the euro and buy into the dollar, weakening the single currency in the process. There wasn’t all bad news for the euro however, as sterling weakened even further against it, suggesting traders expect the U.K currency to be an even riskier proposition than euro. The outlook remains bearish on sterling as well, and any poor global economic data is likely to affect sterling just as much if not more than the euro. Currently GBP is down against the euro, GBP/EUR 1.1130, while EUR/USD trades in short ranges ahead of the weekend at 1.49.
Christmas
Yes I know it’s early but people in my family are already asking that question, what do you want for Christmas? I have always been keen on giving gifts in the form of “experiences” (like concert tickets) in recent years rather than unwanted “tat”. However if you are still keen on buying presents but seeking something more original, take a look at ten of the best Christmas markets in Europe by visiting this link http://www.guardian.co.uk/travel/2009/nov/19/christmas-markets-shopping-europe. Have a good weekend!
