US Dollar:
Dollar/Sterling was mostly flat in trading yesterday as risk appetite by investors was evened out by lingering economic concerns surrounding Sterling. The rise in the dollar was reversed in Tuesday’s trading session, with the rally in the Euro against the Dollar continuing through Wednesday as market sentiment swung in favour of renewed confidence in the Euro as investors turned their back on the relative safety of the Dollar. Further Dollar weakness was seen against other major currencies such as AUD, a commodity led currency, as investors looked towards higher yielding investments in a return for risk appetite. Market open sees more of the same as the Dollar is slightly up on Sterling at 1.5782 and marginally down on the Euro by 0.02% at 1.3773.
Pound:
Sterling rebounded against the USD late yesterday and is remaining stronger this morning but staying lower against the Euro. The greenback (US currency) has been under pressure as risk appetite returned to the market seeing a temporary sell off. Sentiment towards sterling remains vulnerable as the market awaits keys UK data this morning including the claimant count and BoE minutes from their last announcement on QE and interest rates. The big thing amongst the minutes is the vote count which will highlight if all nine members agreed with action to hold interest rates and QE earlier this month. The expectation is for a 9-0 vote amongst the members but any difference amongst voting is likely to put pressure on sterling showing disagreement within the BoE. “I think a 6-3 vote, with the minority favouring an extension in QE, would really put pressure on sterling”, said RBS currency strategist Paul Robson. The MPC is clearly in no rush to hike interest rates (which the market had hoped for) whilst recovery continues at a snail’s pace, limiting sterling from making any significant advances against the major currencies.
Euro:
The Euro climbed higher against both Sterling and Dollar as those shorting Euro futures contracts felt they had jumped the gun in forecasting the demise in the Euro. As a result we saw major gains against the dollar, at one point reaching EUR/USD 1.3788. However, the resilience of this rally will be called into question as Greece and the Euro are by no means clear of the problems that have plagued the Euro for the last two weeks. “On Tuesday, investors held their fire against the common currency, but they’re likely to start firing at the euro again with the same unresolved issues of out-of-control spending still festering”, said Brian Kim, currency strategist at UBS in Stamford, Conn. Trading is likely to be volatile as Greece faced a new wave of industrial action as well as pressure to explain why it had used complex financial instruments in order to conceal the actual size of its deficit.
Quote of the Day
“Time you enjoy wasting, was not wasted.” – John Lennon
