Sterling fell off earlier highs against the US dollar yesterday as it followed the euro downwards against the US currency as markets nervously awaited the results from yesterday’s EU summit. After a night of deadlocked talks the EU summit finally delivered what most had been expecting – a 50% write down for holders of Greek bonds and a boost to the European Financial Stability Fund bringing it up to €1 trillion. Sterling is trading in a similar range as previous days this morning, but down against the euro as investors cautiously bought back into the euro on the news. There is limited data out today in the UK, so expect sterling to trade on market reaction to the summit.

In the euro zone, whilst there was an announcement that a decision had been reached on increasing the bailout fund and also recapitalising banks in the region to the tune of €106bn, there was no concrete plan for tackling the ballooning debt in less competitive European countries. After producing a (vague) austerity plan, Italian parliamentarians ended up brawling and grabbing each other’s throats – a photo that you will no doubt have seen by the end of today. Once again, the rhetoric was strong like most other EU summits, however there was a lack of detail that will see things drag on further. Call in now for a live exchange rate.

In the USA, the US dollar weakened against most of its major counterparts as investors felt happier taking risks. It was noticeable in the fact that the move was a gradual one – i.e. no-one is too sure what to make of the EU summit announcement, other than in principle it is a good thing. Cautious appetite for risk is likely to be the trading pattern today, so if you are buying US dollars, it may be a good time to do so. In addition, there was speculation yesterday that the Federal Reserve would announce another round of Quantitative Easing. Call in now for a live exchange rate – we could be in for further volatility today.

Elsewhere, Japan announced that it would expand its Quantitative Easing by another 5 trillion yen. This was in line with expectations and did lead to some yen buying. In addition, the New Zealand dollar strengthened as Reserve Bank Governor hinted at an interest rate increase.


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