Pound news:
The pound made significant gains against a weaker Euro yesterday and is continuing to trade within the 1.17 range this morning. The pound hit a high of 1.1830 at midnight last night as investors sold the single currency yesterday, on concerns over debt problems in the euro zone, which they considered as more severe than those in the UK. However this uncertainty in the currency markets also hit the pound against the USD with investors seeking the safety of the US currency.
The pound is likely to continue to be vulnerable against the USD as sovereign risk worries undermine it’s position. The UK however, does not have the same political risk now as the euro zone in addition to the large task of managing 16 countries within the member state.
The UK’s political landscape is now looking far healthier than before the election and dispite such a large fiscal deficit the new coalition government has made positive steps in lowering this. The situation in the Euro zone is far from over and far more complex, with investors turning their attention to severe debt problems in various countries including Spain which according to rumours circling around the city yesterday afternoon, is due to be downgraded.
US Dollar news:
The dollar has moved backwards against Sterling and the Euro as the markets review the global outlook and hesitantly move away from the dollar into slightly riskier asset classes.
The euro is up on the dollar by just under 1% at $1.2287 but without much direction as it bounces between the low $1.23 and high $1.21 levels. Sterling is also trading in ranges, today Sterling has moved towards the upper end of the range testing the $1.45 level. Over night the dollar did drop to $1.4515 however Sterling did not have the momentum to hold there and as such the dollar has climbed back to $1.4454.
The dollar will have come under pressure after St. Louis Federal Reserve Bank President James Bullard expressed concern over the market perception of the Fed’s policy to unwind quantitative easing. The market is hoping for a rate increase that might not materialise so soon.
Yesterday was a mixed day on the macroeconomic front, new home sales came in better than expected whereas durable goods orders came in lower than expected, down 1%. Today is also one to watch out for as 13:30 London time sees US GDP q/q and unemployment claims. The market is looking for figures that improve on last month and week’s figures respectively.
The Canadian dollar has regained some ground, moving from $0.93 to a current level of $0.9464 versus the US dollar, up 1.38% on the day so far.
Euro news:
The euro is not moving a great deal this morning as tight highs and lows are frequently traded. Against Sterling the euro has lost some ground, currently trading at €1.1793 to the pound but even so this is not a recent high. GBP/EUR will continue to bounce around €1.1800 with little news to move it either way.
An interesting interview from Former Bundesbank President Helmut Schlesinger revealed that he does not think the euro is at particularly low levels, if his opinion is shared with other EU ministers then we may not see forced EU support for the euro, resulting in further slides against its major pairs.
Yesterday was one for the rumour mill as in late afternoon there was talk of a Spanish ratings downgrade. Clearly this has not happened yet and the markets did not take too much notice as the euro performance does not reflect a recent euro member downgrade. Should Spain receive a downgrade then no doubt the immediate reaction would be a flight to safety as investors leave the euro for currencies such as the dollar and Japanese Yen. For the time being trading is calm this morning with levels in the middle ground of two week highs and lows.
Quote of the Day
“Time is the most valuable thing a man can spend.” – Theophrastus
