Foreign Currency News Updates

US Dollar:
The dollar lost ground on other major currencies including euro and sterling today as fragile stocks and positive Fed Reserve growth forecasts prompted investors to move out of the safe haven greenback and invest in higher yielding currencies. Minutes released yesterday from a Nov 3rd meeting of the rate-setting Federal Open Market Committee acknowledged the dollar’s decline and said ‘it appeared to reflect the unwinding of safe haven demand’. The FOMC also said ‘any tendency for dollar depreciation to intensify or to put significant upward pressure on inflation would bear close watching’. The Fed noted increased signs for a sustainable economic recovery, further boosting traders view to put their money into riskier currencies such as sterling and euro, although the outlook remains that lending rates will probably remain low for an extended period. Further confirmation of low U.S rates should contribute to dollar weakness this week, while eyes will be on U.S data due later today. GBP/USD up to 1.6708 this morning, while EUR/USD at 1.5008.

Pound:
Sterling is trading considerably stronger this morning against a weaker USD up over 1 cent to 1.6705. The pound is also up against the Euro regaining losses seen yesterday morning, trading higher and above 1.11. Sterling’s strength may be attributed to an increase in risk appetite globally in addition to speculation amongst the market that today’s revised GDP number may be a more positive figure than the –0.3% forecast. Preliminary GDP released a few weeks ago showed the UK was still in a recession last quarter, news that immediately weakened sterling and highlighted the slow pace of recovery we are facing. Any revision up for this growth data can only be supportive of the pound by providing the latest snapshot into economic growth within the UK. Mervyn King, the Governor of the Bank of England, said yesterday that he has been encouraged by signs of recovery but also cautioned against the prospect of robust growth. The initial GDP data which highlighted that the UK had not emerged from the recession left us trailing behind other major economies such as Germany, China and France where their growth data showed the downturn had ended. In most recent economic news released yesterday mortgage approval data came in under the expected 44.0k at 42.2k showing less activity in mortgage lending and the housing market which would explain sterling’s initial falls. In addition to this reduced business investment in items ranging from new machinery to computer systems raised concerns over the pace of economic recovery once again. Revised GDP is due at 9.30am this morning.

Euro:
The Euro was up against the dollar this morning as investors, buoyed by low interest rates prompting riskier investments, looked to the euro over the dollar for gains. Sterling held firm over the single currency however, as German consumer confidence unexpectedly dropped on the back of lower than expected survey data. The growing public fears of rising  unemployment in part boosted the euro over the dollar as traders saw the news as reason to come out of the safe-haven dollar into the euro, although sterling was similarly attractive, with news today that the U.K economy probably came closer to pulling out of recession in the first quarter than originally expected. Meanwhile, the European Central Bank considers offering banks unlimited funds for 12 months as part of their strategy to get them lending again. There are some fears this could prompt the ECB to raise its rates, increasing the cost of money on the markets and strengthening the euro even further. GBP/EUR currently in sterling favour at 1.1132,  EUR/USD 1.5008.

Quote of the Day
“Life is a great big canvas, and you should throw all the paint on it you can.” – Danny Kaye