Pound:
Sterling is continuing to trade into 1.14 against the Euro after falling into this area on Friday. Against the USD the pound is trading within similar ranges as last Friday, currently in the higher end of 1.61. The market is clearly cautious ahead of UK GDP data for the fourth quarter of 2009 due at 9.30am tomorrow. There is some concerns over whether this data will be a positive number and in line with the 0.4% forecast after Friday saw significantly weaker than expected retail sales data.
Sterling has been improving in recent weeks aided by increased prospects for the BoE to halt quantitative easing and start raising interest rates again this year. If GDP does come in line with forecasts tomorrow this would represent the first rise in GDP since early 2008 and mark the formal end of an 18-month recession that has seen the economy contract by 6%. The Treasury, which has yet to see the figures, will warn that any upturn will be fragile. Alistair Darling, the chancellor, will say the recovery remains dependent on official support for the economy remaining in place.
In other news, a survey by rightmove the property website showed that 53% in the UK believe house prices will rise again over the next 12 months compared with 10% this time last year. Those wishing to avoid risk and uncertainty over the exchange rate should lock in any commitment sooner rather than later.
US Dollar:
The Dollar was boosted yesterday over Euro and Sterling but trading in tight ranges this morning as risk appetite in the market waned after President Obama’s proposals for banking regulation and expectations of a rate hike in the near future in China led investors to pull out of more risk sensitive currencies such as the Euro and Sterling, into the safer Dollar.
The news from China adds to speculation that the global economy is taking longer to recover than previously expected, weighing on risk sentiment helped along up by more positive U.S data and an optimistic outlook for global economic recovery. Debt concerns in the Euro zone, a U.S mix up of banking regulations, and now news that China, one of the major nations we hoped would drive us forward out of this recession is now reported to be in a slightly worse state than we expected.
Trading was tight on Dollar pairs this morning as traders remain cautious, waiting for U.S home sales data due today, Case-Schiller home prices Tuesday, and the statement from the Federal Open Market Committee meeting on Wednesday. If it sounds pessimistic, traders could even sell the Dollar as well as the Euro in search for even safer currencies such as the Yen. GBP/USD 1.6149, EUR/ USD 1.4140.
Euro:
The Euro corrected itself slightly against Sterling after its recent losses, and remained on the back foot against the Dollar without conceding further ground from last week’s heavy losses. Current Market sentiment is putting pressure on the Euro, with the threat of a buyers’ strike for Greek paper and the EU’s wrangling over the size of her budget deficit all fuelling more uncertainty. Whilst this sentiment certainly isn’t good news for the Euro, there is enough concern within the U.K and now U.S with Obama’s proposals for new banking regulation that is preventing a wide spread move from traders in to the usually safer Dollar. Risk appetite is likely to be held back though in the near future, with no positive Euro data, uncertainty of the U.K government in the run up to the elections, and turmoil in the U.S banking sector all main forces supporting cautious plays in money movement.
German consumer confidence was the only data of note in the Euro zone today, and as it was worse than expected will provide little rest bite to the single currency’s recent decline, although GBP is fairing little better against it this morning. GBP/EUR 1.1416, EUR/USD 1.4140.
Quote of the Day
“The door of opportunity won’t open unless you do some pushing.” – Anon.
