Foreign Currency News Updates

Pound:
It would appear that the markets are not all that bothered about a hung parliament and as such Sterling is making positive gains against the euro and Greenback. The battle for strength is somewhat uphill as a number of resistance levels sees Sterling trade within ranges right now.

Yesterday was a strong day vs the euro, pushing as high as €1.1614 but once again the pound did not quite have the momentum to hold above that level. At 16:30GMT yesterday Sterling was at €1.1580 and this morning sees it holding above the €1.15 level at €1.1518. The very same can be said for GBP/USD, Sterling pushing as high as $1.5498 but failing to push through to $1.55 levels. At the close of play it had dropped to $1.5433 and this morning shows a further slip with current trading levels dipping into the $1.5375 level.

The result of the election will be interesting to watch in terms of Sterling performance as at the moment opinion is very much split as to how the pound will perform should we find ourselves with a hung parliament. Sterling’s gains equated to over one percent yesterday as Sterling hit a three month high.

Sales data out at 09.30GMT, if positive, should have the impact to push Sterling higher today.

US Dollar:
The dollar remains relatively unchanged this morning as a lack of data from the U.S as well as no real concerns about the economy resulted in little cause to buy or sell the dollar this week. Looking at the bigger picture, the dollar has gained on a number of currencies (mostly Asian) as speculation increases that the Federal Reserve may consider withdrawing stimulus from the U.S economy on the back of data showing the American economy is picking up momentum.

Consumer spending increased at a 3.3% annual rate last quarter which is viewed as a fundamental indicator of economic health. “The recent set of good U.S. data will fuel speculation about rises in interest rates there, providing some impetus to the dollar,” said Shuzo Kakuta, a senior foreign exchange adviser at Tokyo Tomin Bank Ltd. However, this continuing flow of good news needs to be treated with caution as time and time again traders have speculated that a rate rise is imminent on the back of strong data yet Ben Bernanke & Co counter by reiterating rates will remain low for the foreseeable future.

Whilst geographically the U.S and eurozone may not be neighbours, a move too soon to withdraw or tighten monetary policy may cause a very swift global stall in recovery, sending countries on the edge of collapse such as Portugal and Spain into default. The dollar opens today up on both Sterling and euro by 0.19% and 0.20% respectively.

Euro:
It goes very much from bad to worse for the eurozone as at every turn there seems to be an obstacle facing Greek recovery. Yesterday it was the turn of Angela Merkel who voiced her disapproval over the Greek Bailout. Her stance was in favour of the bailout if the Greeks had tried other measures to control their finances. Instead, the Greeks didn’t really attempt fiscal tightening and went straight to the ECB for funding. Consequently Angela Merkel has expressed her disapproval, which is understandable. “There is concern that the German government may delay the extension of financial aid for Greece,” said Akane Vallery Uchida, a currency strategist at Royal Bank of Scotland Group Plc in Tokyo. “This led to resumed selling of the euro.” The issue here is that everyone is looking for Greece to employ tough measures to curb government spending but the country appears to have no room for manoeuvre. Case in point sees Greek transport workers go on strike today over proposed government spending cuts. Naturally, all of this has seen euro weakness but as I have stated before the fact that EUR/ USD is holding above the $1.3350 level still continues to intrigue.

Quote of the week
“The only real mistake is the one from which we learn nothing.” – John Powell