Pound:
Sterling is down against both the euro and dollar as the one possible obstacle to Sterling growth is back at the forefront of investor concern, namely the threat of a hung parliament. Last week saw the Conservatives edge out in front, however, a recent poll now shows that no party holds the majority lead.
Yougov poll:
Lib Dems 33%
Conservative 32%
Labour 25%
Against the euro Sterling failed to hold above 1.1410 levels. Despite reaching 1.1414 on Friday, Sterling has come away from that level now trading at 1.1325, down 0.44% on the day so far. The same can be said about GB Pound / US Dollar. A strong showing on Friday saw Sterling push towards 1.5550, however, the failure to hold near this level saw the pound fall back to 1.5381 on late Friday and 1.5244 this morning. Michael Hewson, analyst at CMC Markets sees the upside momentum failure as indicative of further losses for the pound, “This failure here could well lead to further losses back towards the $1.5120 area and in turn a re-test of $1.5000.” Any macroeconomic news is likely to be overshadowed by the elections, case in point sees an article in the telegraph predicting strong growth next year for Britain yet Sterling remains under pressure for the time being.
US Dollar:
It is a case of two sides of the story for the dollar as we head into the new week. Providing support for the dollar is the fact that risk sentiment has dried up for the time being with regards to holding eurozone sovereign debt and securities. Come the end of May Greece needs to find €11.6 billion in order to service its debt and the majority feel that this can’t be achieved by themselves, “Investors remain wary the country can roll over its debts without external assistance,” Mansoor Mohi-uddin, chief currency strategist in Singapore at UBS AG. “We continue to see the euro falling back to $1.30 over the next three months.”
This morning sees both Sterling and the euro down on the Greenback, Sterling at 1.523 down from 1.538 on Friday and down 0.51% for the day so far. The euro is trading at 1.3455, down 0.33% on the day and 37 pips from Friday. However, a major headwind for dollar gains will be the debacle surrounding the Goldman Sachs issue. Such is its power and reputation that the sudden news of a SEC investigation sent the dollar tumbling late last week with U.S equities weaker across the board at Friday’s close. The major winner is the Yen as investors sell the dollar on the likely public outcry over the Goldman Sachs news, as such the U.S. government “may strengthen (banking) regulations, thereby raising uncertainty over the U.S. financial sector,” said Daisaku Ueno, chief analyst at Japanese brokerage Gaitame.com. That may benefit the Japanese currency most, Ueno said, as investors consider it to be the safest refuge when global financial markets grow turbulent.
Euro:
Whilst stronger against the pound this morning, the euro is experiencing weakness broadly speaking as an upcoming deadline to service its debt puts investors on edge. Many believe that it is only a matter of time before Greece finally makes a formal request for aid in order to service its debt obligations. One of many issues regarding the bailout is the IMF, specifically the strict rules they would implement if Greece turned to them for help. Initially looking to avoid their harsh regulations Greece said they did not want their help, yet with very few options European Union finance ministers have told Greece to prepare itself for the International Monetary Fund’s conditions on a bailout package.
The euro is down for a third day against the dollar as concern Greece will activate an EU-led 45 billion euro ($60.6 billion) emergency-loan package damped demand for the European currency. Unfortunately the outlook remains unclear as the ash cloud over northern Europe has delayed the EU IMF talks until April 21st at the earliest.
