US Dollar:
The Dollar opens down this morning against both Sterling and the Euro as the recent unemployment number was worse than expectation. Whilst down 6000 claims, the final figure of 462000 was higher than the 456000 predicted. Today at 13:30 GMT sees the US retail sales figure released, a gauge of consumer spending which accounts for the majority of overall economic activity. With a slight uncertainty on the number, investors are hesitant to take big positions on the Dollar over the weekend, hence the Greenback trading at $1.510 against the pound, down from a week low of $1.498. Market sentiment surrounding Sterling saw it appreciate against the Dollar as investors are betting on closer than expected end to a loose monetary policy.
Pound:
Sterling has made some significant gains against a weaker USD this morning and is trading flat against the Euro as sentiment surrounding the UK fiscal position continues to deteriorate. Unicredit (Europe’s second largest bank) has “put the cat amongst the pigeons” by alerting investors that the UK is at serious risk of a bond market and sterling collapse, facing a more serious budget deficit than Greece. Kornelius Purps, Unicredit ’s leading analyst in Germany said “Britain’s AAA-rating is highly at risk. The budget deficit is huge at 13% of GDP and investors are not happy. The outgoing government is inactive due to the election. There will have to be absolute cuts in public salaries or pay, but nobody is talking about that,” This is not the sort of financial press the UK needs right now and clearly highlights how current debt levels and the looming election are keeping sterling low.
As the political situation heats up, drawing closer to the election, it is likely the pound will remain under continued pressure and if poor economic data becomes a reality next week lower trading levels are likely. Monday morning starts with rightmove house price data due out overnight on Sunday and the claimant count on Wednesday. Have a great weekend.
Euro:
This week has been relatively calm for the Euro as a lack of significant economic data has seen the Euro trade within tight ranges against both the Dollar and Sterling. Whilst the debt woes continue to linger, the problems faced by Greece are known to most and so the Euro is priced accordingly. For the short term any movements must be treated with caution as it may be a while before we see a move in the Euro that marks a long term trend.
A weak currency boosts exports and as such the Euro Zone may not be in such a hurry to strengthen its currency. Evidence of this can be seen in the Yen as it drops to a two-week low against the Euro. The Yen is one of the strongest performing currencies yet its strength does not reflect its economy which is struggling, as such the Japanese government has signalled it is ready to intervene to weaken the Yen in order to boost its export demand.
Quote of the Day
“Be a life long or short, its completeness depends on what it was lived for.” – David Starr Jordan
