US Dollar:
The Dollar was down on the Euro after positive comments from ECB President about a rescue plan for Greece but up on Sterling as political uncertainty and other concerns in the U.K allowed the Dollar to push GBP right back to 1.5568 overnight.
Speculation over a hung parliament in the U.K will probably continue to support USD against the Pound. Although the Dollar has recorded some losses against the Euro this morning the U.S currency is still on the front foot whilst uncertainty remains over the fiscal concerns in Greece and worry over other nations such as Portugal and Spain also at risk of entering the crisis. Whilst ECB President Trichet suggested yesterday that Greece could be bailed out and problems in the Euro zone resolved, it will take more than rhetoric to convince investors to start entering the Euro zone markets on a wide scale for anything other than short term gains.
Bank of England Governer Mervin King speaks tomorrow with traders watching the GBP/USD pair closely with negative or positive sentiment expected to influence the rate. GBP/USD 1.5605, EUR/USD 1.3739.
US shows surprising drop in jobs
Pound:
Sterling is continuing to trade lower against the majors ahead of the Bank of England quarterly inflation report due tomorrow morning. Data out overnight was mixed with positive news for the housing sector with the RICS (Royal institute of chartered surveyors) showing more surveyors reporting house price rises at 32% against 28% forecast.
News for the retail sector also out overnight highlighted a fall in sales for Jan to –0.7%, the worst performance in 15 years. The pound is still trading lower from underlying concerns over the political situation in the UK and sovereign debt risk (public sector debt). UK December trade balance data is due at 9.30am with the market watching this closely for hinted on revised fourth quarter growth (GDP) numbers. A stronger UK trade balance number will highlight that the BoE aim to create recovery through an increase in exports (cheap pound) is working but going by last night’s retail sales numbers, consumer spending (a key contributor to growth) remains vulnerable.
Tomorrow sees the release of key manufacturing production data at 9.30am in addition to the inflation report delivered by Mervyn King tomorrow at 10.30am.
Euro:
The Euro recovered slightly on Sterling and the Dollar this morning as traders made short term gains on the currency and futures markets in the Euro zone. It is expected to be short lived however as sentiment remains bearish on the Euro with debt concerns still a problem in Greece and other Euro zone nations. Fears of the problems spreading to the U.K, as well as lowest January British retail sales for 15 years and political uncertainty have all put pressure on the Pound supporting a Euro gain overnight against GBP.
The Dollar still carries some weight against the Euro and any Euro gains there are not expected to continue for very long. Rhetoric from the E.U President Trichet that the European Central Bank may help bail out Greece for the good of the region may have also helped the Euro this morning, but the currency still looks susceptible to further losses, only problems in the U.K preventing further losses against Sterling. GBP/EUR 1.1360, EUR/USD 1.3739.
Quote of the Day
“If you wait, all that happens is that you get older.” – Larry McMurtry
