Sterling gained by 0.5% against the US dollar yesterday morning, recovering from an earlier 7 week low that was hit after investors speculated over the scope and extent of a potential downgrade of UK banks by rating agency Moody’s. Many investors covered short positions in order to avoid the volatility of a potential announcement and this helped the pound recover slightly, whilst mixed UK public sector borrowing figures had little or no effect. Data showed that net borrowing dropped from last month’s £15.6bn to £7.7bn, but this was higher than the £5bn that had been forecast by the markets. Sterling still remains vulnerable against the US dollar as it is liable to track euro weakness against the US currency in the wake of the next round of the euro zone debt crisis. Call in now for a live exchange rate, as we have revised GDP data which could cause some movement.

In the euro zone, the euro edged up from a two-month low against the dollar on Tuesday, helped by stronger than expected German economic data, but the gains are likely to be short lived in the wake of a resurgence in the European debt crisis. The euro has dropped by 5% since early May, taking a hammering on speculation that the Greek bailout will need restructuring and on fears of a contagion spread to Spain and Italy. Out today, there is German consumer confidence figures so call in now for a live exchange rate.

In the USA, the US dollar slipped yesterday as strong data helped to boost risk appetite and reverse (to an extent) Monday’s moves. Figures showed that purchases of new houses rose to the highest level this year. Sales increased 7.3 percent to a 323,000 annual pace last month, surprising many investors who had expected poor figures. Combined with the better than expected German figures, this saw less panic from investors and as such, they moved out of US dollars into other ‘riskier’ currencies. There is key durable goods order data released today, so call in for a live exchange rate.

Elsewhere, the New Zealand dollar gained more than 1 percent against the US dollar after a quarterly survey on behalf of the Reserve Bank of New Zealand showed inflation expectations in the country rose in the second quarter, boosting expectations that the central bank would look to hike rates in the coming months. In addition, the Australian dollar was up 0.3% to $1.0542, off a one-month low of $1.0478 hit on Monday.

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