The pound has regained the majority of it’s losses made against the euro towards the end of last week, up 0.86% to 1.1950 and is trading slightly down against the USD to 1.5846. The only data release out last night from rightmove, highlighted a rise in UK house prices of 0.3% as the number of properties coming on to the market fell to its lowest level since January 2009, much improved on the figures for last month which showed a 0.3% drop. The pound in recent days has been aided by ongoing concerns surrounding rising inflation with the main number for the month (CPI) due out tomorrow morning and forecast at 3.3%. If this number is higher than forecast we are likely to see significant support for the pound by the simple fact that higher inflation will support the argument that a rise in interest rates will need to happen sooner than expected. Some market participants are calling for sterling to trade back into 1.60 against the USD and comfortably above 1.20 vs the Euro in the short term.
The Euro was down against its main rivals including Sterling and the U.S Dollar this morning as debt concerns continued ahead of a Euro zone finance meeting later. The topic of discussion is likely to be the European Financial Stability Fund (EFSF) that was set up last year in response to the debt crisis in the region. “Euro-zone finance ministers meet in Brussels today, and while the future of the EFSF will no doubt be discussed, major policy announcements are unlikely at this stage, which may disappoint” the euro, Adam Cole, global head of foreign exchange strategy at RBC Capital Markets said in a note to clients today.
The single currency was down a percent on both USD and GBP as Bank of Japan Governor Masaki Shirakawa also commented that European Financial Markets remain unstable because of the concern over the long running crisis. “The debt problem is not going to go away,” said Joseph Capurso, a currency strategist in Sydney at Commonwealth Bank of Australia, the nation’s largest lender. “I don’t think finance ministers will lead to a big overhaul of their financing facility. We have pretty hard conviction that the euro is still a sell.”
US DOLLAR NEWS
The Dollar lost ground to Sterling this morning as speculation mounted over a U.K interest rate increase in the near future. Against the Euro, the Dollar made gains after debt concerns continued there and confidence in the single currency was down over the weekend and in early trading after negative comments for the prosperity of the region by Japan’s finance minister Shirakawa. The Dollar was at a one month low against Sterling over the weekend and losses continued as better than expected U.K producer prices supported speculation that the U.K would raise rates in the coming months. With a raise in rates bringing a clear advantage to yields backed by Sterling over the Dollar traders have given backing to GBP in the short term, boosting the currency’s value over the Dollar. Technical analysts at Mizuho said a weekly close above $1.5900 would trigger an imminent test of $1.6000. Movement on the greenback should be limited today however as trading will be thin in the U.S bank holiday.
QUOTE OF THE DAY
“A vision without action is just a dream. Action without vision is just a waste of time. A vision with action is able to change the world.” – Nelson Mandela