Pound:
Sterling has recovered slightly from yesterday’s falls against the major currencies ahead of this morning’s crucial bank of England data due at 10.30am. Yesterday saw the trade deficit widen unexpectedly coming out at –7.3B against –6.6B forecast as new fears emerged about the UK’s credit rating. Imports are continuing to outstrip exports despite the boost provided to exporters with a weaker pound.
In further bad news for sterling yesterday, Fitch the US credit rating agency said the UK was among the counties most vulnerable to losing it’s AAA rating along with Spain. This was not the first time comments of this nature have been made on the UK’s rating with Fitch previously warning that if the government does not pursue an aggressive programme of fiscal tightening (sorting out public sector debt) after the general election, our AAA status would be threatened and that would be disastrous for the pound!.
Today sees the release of manufacturing data forecast at 0.4% and the BoE inflation report which will feature their projection for inflation and economic growth over the next two years. You can watch the report live online at www.bankofengland.co.uk
US Dollar:
The Dollar remained on the front foot against Euro and Sterling as rhetoric over a possible bail out for Greece was still uncertain and did little to support the common currency or Sterling. Until a resolution in the Euro zone is apparent traders are cautious to back European markets, helping to support the safe haven Dollar.
News in the U.K that Fitch rating agency named Britain as the most vulnerable of the triple A sovereigns also helped the Dollar realize further gains on the U.K currency, pushing it back to 1.5651 overnight.
Trade Balance data in the U.S will probably do little to move the Dollar today, as the market eyes BOE Governor Mervyn King’s speech on UK inflation, words that generally put pressure on Sterling, and with other concerns in the U.K, further Dollar strength against the Pound is quite possible. With investors also uncertain whether the ECB’s talk of bailing out Greece will come to fruition, the Dollar will probably remain strong against the Euro in the foreseeable future. GBP/USD 1.5696, EUR/USD 1.3765.
Euro:
The Euro was trading within tight ranges this morning after uncertainty over the bailout of Greece. The euro fell on Wednesday, trimming some of the previous day’s gains, with investors awaiting details of a rescue package for Greece, keen to see how it could impact the euro zone economy. The Euro is down against the GBP and USD by 0.04% and 0.26% respectively. “Greece is at the forefront of everybody’s (mind), bond markets, equity markets and foreign exchange,” said Dean Popplewell, chief currency analyst at online trading foreign exchange platform Oanda.
The BoE report due at 10:30 GMT this morning on inflation figures and outlook for the next 2 years is likely to take a negative tone. Mervyn King’s announcement is likely to add further downward pressure on Sterling against Euro. With no real Euro data of note released today, the market will watch Mervyn King and other UK data such as GDP estimates for an indication of market movement. GBP/EUR 1.1399 EUR/USD 1.3765
Quote of the Day
“To accomplish great things, we must dream as well as act.” – Anatole Fran
