Pound:
The pound has rallied this morning particularly against the USD up by over half of one percent on the day and 0.13% against the Euro. Nationwide consumer confidence data which came out overnight came in higher at 73 against 70 expected suggesting the economy is improving. The consumer confidence data highlighted improvements in employment prospects and household income over the next six months.
Speculation has started to increase over the Bank of England ending quantitative easing in Thursday’s announcement. This move would be positive for the pound as it will indicate the first step by the BoE in
tightening monetary policy before interest rate rises expected later in the year. Although sterling’s move up has been mainly against the USD concerns over how Greece will service it’s debts and cut it’s deficit continue to drag on which could create fresh weakness in the single European currency.
Service sector data has just come out weaker than forecast at 56.6 at 54.5 but continues to show expansion in the sector . The market will now focus on the BoE and European interest rate announcements tomorrow.
US Dollar:
The Dollar lost a little ground on Sterling and the Euro this morning as recent upbeat equity markets convinced traders to risk trade for profit, selling the Dollar in favour of higher yields. The levels remained steady though before the all important Bank of England announcement tomorrow.
The Dollar was pushed back slightly by the Euro after Greek Prime Minister George Papandreou announced new measures to cut debt there, and the E.U seems to be warming to the idea of a solution to their massive budget deficit. Traders have also priced in any previous concerns from this issue and any upbeat rhetoric could help the single currency to further gains over the Dollar.
U.S industry data has been positive of late and while this has had a seesaw effect on USD with risk sentiment causing Dollar selling and consequent weakness, the medium to long term view is bullish on greenback, as expectations still remain that the U.S is the most likely country to bring the global economy out of recession.
Today a raft of USD will probably support the currency although investors remain cautious and trading thin before the bank announcements due later this week. GBP/USD 1.6050, EUR/USD 1.4016.
Euro:
The Euro was up on Sterling and Dollar marginally this morning but trading in tight ranges as traders remain cautious before the Bank of England announcement tomorrow. There was more encouraging news from Greece as the Prime Minister Papandreou seemed committed to reducing the deficit and there was more upbeat rhetoric from the E.U on finding a resolution to the debt crisis there, suggesting any debt issues causing wider concerns for other countries in the Euro zone could be curtailed.
Traders supported the single currency this morning as risk sentiment crept back into the market after positive U.S data had made the equity markets more attractive of late. The correction may be short lived however if Euro economic data continues to undermine Euro zone nations’ potential to attract investors.
Retail sales data from the region could back this view today, although most movement will be minimal ahead of tomorrow’s BOE announcement. GBP/EUR 1.1433, EUR/USD 1.4016.
Quote of the Day
“Keep true to the dreams of thy youth.” – Friedrich von Schiller
