Pound news:
Sterling can be viewed as standing on thin ice at the moment with the emergency budget just around the corner. So far the Pound has fared well with the week showing a gain on the U.S dollar but a minor adjustment downwards on the euro. Having hit €1.2130 towards the end of last week Sterling has come away from those highs to drop back to €1.1983. The budget will be viewed as the answer to the U.K’s financial problems but the government must get the balancing act just right. The cuts must be aggressive otherwise the ratings agencies may re-think our credit rating however the same cuts must been seen to accommodate growth and allow for an interest rate rise at some point. “Given what’s happening in Europe, the risks are very, very high,” said Emma Lawson, a currencies analyst at Morgan Stanley in London. “If the budget is not aggressive enough, then the market will turn, having given the new government the benefit of the doubt up to now.”
So far so good though as yesterday saw retail sales up 0.6% when the market was only looking for a 0.1% increase. Trading this morning is favoring Sterling as it is showing gains on both EUR and USD but whether this is the calm before the storm remains to be seen.
US Dollar news:
Heading into the weekend the US Dollar has lost ground to both Sterling and the euro as investors confidence has, for the most part, improved over the last five days. This last week has seen the euro move from the $1.21 levels to a current price of $1.2391, quite an impressive climb given all the attention the euro zone has been receiving. Furthermore today highs are indicating $1.2413, so far the euro has not been able to hold above $1.24 but nevertheless it is a respectable effort for the troubled currency.
Sterling has also faired pretty well over the course of the week, Monday saw the Pound creep into the $1.4750 area with the rest of the week showing a hold above $1.48 with $1.4867 your current price to buy.
Yesterday’s afternoon session would have seen the dollar come under some pressure as unemployment claims were up 20,000 and the consumer price index was in line with expectations. Today is a very quiet day for macroeconomic news with nothing of great impact scheduled for release. So far trading is on the quiet side of things with the commodity lead currencies edging ahead but by small margins, the Canadian dollar edging the furthest ahead by 0.19% so far.
Euro news:
A snap shot of the week shows a slightly disjointed relationship between perceived euro zone health and EUR/USD trading. Whilst the rumours have centred on whether or not Spain is on the brink of default the single currency has slowly climbed from $1.2070 a week ago to $1.2398 this morning. Likewise against the Pound, the euro has fended off challenges and managed to keep Sterling down below €1.21 for the entire week. Brown Brothers Harriman sums up the situation pretty well by commenting that “Euro zone news has not been particularly bullish, but the market has become blasé with the whole crisis story, tending to virtually ignore negative fiscal-related stories and to rally on better-than-expected economic news/fiscal developments,” it said.
The rally in the euro was forecasted to run out of momentum at the $1.2150 level but a recent successful Spanish bond auction gave the euro further support to take it to this two week high. “The Spanish bond auction was better than expected, providing a boost to risk appetite and allowing the euro-dollar to break the $1.2350 resistance,” said Hans- Guenter Redeker, London-based global head of currency strategy at BNP Paribas.
Quote of the Day
“You cannot build a reputation on what you are going to do.” – Henry Ford
