POUND
The Pound fell against the Euro and U.S Dollar this morning as a weak outlook for the U.K economy dampened investor confidence over the U.K currency. “There was some talk of sterling becoming another reserve currency due to debt problems in the U.S. and the euro zone, but the UK has problems on its own so sterling will stay in a range,” said Geraldine Concagh, economist at AIB Group Treasury in Dublin. Although the Pound continues to trade in tight ranges against its main counterparts with debt concerns ongoing in the Euro zone and U.S, it started the day on the back foot as expectations of another round of quantitative easing as well as the prospect of two years without an interest rate rise weighed on the U.K currency.
With little U.K data due to be released until next week, the Pound will probably move on the back of Euro and U.S news, such as U.S retail sales data at 13:30GMT today. In all likelihood tight ranges are again expected between the Euro, Dollar and Pound as investor confidence is at a low in all regions, with any gains quickly corrected as traders move to take short term profits.
EURO
The Euro edged up on the Dollar and Pound this morning as a rise in U.S stocks sent a feeling of risk sentiment throughout the market in early trading. The single currency was still tentative however as Euro zone data has been increasingly poor of late, including industrial production released this morning that showed output of -0.7% rather than the 0.1% forecast. If data continues to underperform in the region, and similarly in the U.S, a risk averse mood could again creep in to the market and support the Dollar and other less riskier currencies over the Euro. Traders also wait cautiously to see if the ECB will cut interest rates as their austerity measures, such as monetary easing, curb growth. “The market is now factoring in rate cuts from the ECB and the data will potentially start to be a factor as well, as you have seen some slowing,” said Greg Gibbs, a currency strategist at Royal Bank of Scotland Group Plc in Sydney. “You continue to look at some of the weak data points out there and it suggests euro is going to come lower.”
US DOLLAR
The Dollar was held back from any previous gains on the Euro and Pound as a rebound in U.S stocks gave the market impetus to adopt risk sentiment again and gave the riskier single currency the advantage. This was tempered however this morning with negative Euro zone industrial data, as well as caution ahead of U.S retail sales data due out at 13:30GMT today.
The Dollar continues to trade in tight ranges against its Euro zone and U.K counterparts as uncertainty in all regions still remained. Fears over the U.S economy and fiscal debt concerns in both the U.S and Euro zone, as well as concerns over a sluggish U.K economy have contributed to wider concerns over the stability of money markets of late. “The risk-averse sentiment has not gone away really. For today, the bears are resting,” said Kumar Rachapudi, a fixed income strategist at Barclays Capital in Singapore. Until positive news over a resolution to these concerns is forthcoming, the volatility makes it extremely difficult to predict which currency will take the next step forward over its counterparts. For now, most traders are protecting their profits and trading cautiously, which is reflected in the tight ranges of the main players.
