Much has been made of the threat of a hung parliament and in recent weeks it has been the cause of Sterling weakness. Conversely, this goes against Sterling movements over the last few days. Sterling has not made significant one day gains but it has consistently moved higher against both the euro and the US Dollar. With current levels against the dollar at $1.54, the avoidance of a hung parliament may see a short term break to $1.55. Against the euro the picture is much the same as moderate gains day by day has seen Sterling move closer to the €1.15 levels.
This morning saw Sterling touch a high of €1.1542 but rumours of weak retail figures have pushed Sterling slightly lower. Figures just out show that public sector net borrowing was marginally better than expectations at a deficit of 23.5 billion. Retail sales figures were slightly damper than expected at a month on month increase of 0.4%, market was looking for up 0.6%.
The dollar fell against the Yen in Asian trading as Hedge funds move away from the Greenback and into the Yen as relatively speaking the Yen is seen as a very safe currency to hold at the moment. Against Sterling the dollar continued to lose ground as Sterling moved through the $1.54 level. This morning sees a continuation of that trend as Sterling starts the day on solid ground, up 0.25% at $1.5438.
Against the euro there was little change overall, however broadly speaking the euro is ticking up, this morning sees the dollar edge down as the euro pushes into the 1.34 level. Currently the euro seems to have some staying power as it is holding above 1.3411.
Against the Canadian Dollar the U.S dollar is hovering just above parity. In yesterday’s trading the Loonie did touch parity but then moved away to end at 99.97cents. “We’ve got a lot of good news priced in,” said Shane Enright, a currency analyst in Toronto at Canadian Imperial Bank of Commerce. “We probably need a fresh catalyst to take us significantly below parity or else we’ll just sit around these levels.” A busy day for USD, today sees inflation data as well unemployment and existing home sales. All of which are leading markers of economic health and as such will be watched closely by traders. U.S data hits the airwaves at 13:30GMT.
Once again the performance of the fixed income markets has been the driving force for euro performance. Greek German yield spread hit a record high as investors view Greek debt as having a high rate of default. What is interesting about this is that the euro has suffered but not by as much as you would expect. It would seem that the constant problems in the eurozone have been priced in and current euro weakness has levelled out.
Against the dollar the euro is holding strong above the $1.34 level, up on the day by 0.18% at $1.3413. There is mounting concern that the bailout package will have to be tapped sooner rather than later and that the current amount put aside for Greece will not be enough in the longer term “there is certainly concern that the Greece issue won’t go away even if they get the funding, as the key is what yields they will have to pay and if it is sustainable,” said Ho Woei Chen, an economist at United Overseas Bank Ltd. in Singapore. “This is weighing on sentiment”. Traders will be watching upcoming meetings between EU, IMF and Greek Ministers for signs of things to come.
“Don’t let life discourage you; everyone who got where he is had to begin where he was.” – Richard L. Evans