US Dollar:
The US Dollar was performing well against the Euro and Sterling and holding steady in tight ranges this morning before a raft of U.S data is released including industrial production and housing market figures, as well as the Fed Reserve’s two day policy meeting that ends tomorrow. If the economic data comes in better than expected the Dollar could see further gains, suggesting secure credit ratings are of more interest to investors than risk sentiment. Additionally, if the Fed meeting hears more dovish comments from the central bank’s policy meeting suggesting benchmark interest rates will be kept low for ‘an extended period’, investors may follow a similar pattern in weighing up rising interest rates as a major factor in buying that country’s currency. In this scenario the Dollar could be sold off and lose value against the majors. Good economic data might convince the Fed to be more upbeat however. We will see today. GBP/USD 1.6237, EUR/USD up for the Dollar at 1.4542
Pound:
The pound is trading up a further 50 points from yesterday’s close against the Euro at 1.1175 but is trading down against a resurgent USD by 70 points to 1.6253. Economic news over night was more positive on the housing market than yesterday with the proportion of estate agents reporting an increase rather than a decrease in house prices and at its highest level for three years, according to figures from the Royal Institution of Chartered Surveyors (RICS). In addition to more positive news for the UK the pound appears to have taken full advantage of economic problems facing some of the member states within the Euro-zone in addition to benefitting from an increase in risk appetite within the financial markets as concerns over Dubai’s debt crisis fade and bank stocks rise.
UK CPI which is the main inflation number for the UK has recently been released this morning coming out higher than the 1.8% forecast number at 1.9%, lead by sharper increases in oil prices . This is supportive of the pound as the data comes out in line with Bank of England forecasts for inflation to rise in the short-term and is closer to the 2% target. Tomorrow sees key employment data for the UK including the claimant count change and unemployment rate which could support sterling further if better than expected.
Euro:
Good news for those buying Euros this morning, as the single currency fell to new lows against Sterling and the Dollar as German investor confidence is expected to fall for a third month in December. The stumbling economic recovery in Europe’s largest economy, coupled with Greece’s widening deficit caused upset for the Euro in the markets this morning. It may not be sustainable however, as Greek Prime Minister Papandreou remarked that Greece would bring its massive budget deficit into line with EU rules by 2013. The ECB has also stated recently that ‘conditions are now stable enough’ in Europe to scale back emergency measures. The question is whether risk sentiment will drive this market where traders move out of the Euro with more positive data emerging, or whether they move out of risk trading and buy currencies with countries that have more positive
interest rate potential and secure sovereign statuses. GBP/EUR up for Euro buyers at 1.1165, EUR/USD Euro feels the pressure at 1.4542.
Quote of the Day
“If there be any truer measure of a man than by what he does, it must be what he gives” – Robert South
