Sterling jumped to an 11 month high against the euro yesterday as investors scrambled to buy the pound, believing sterling to be a much safer investment than the ailing euro. Better risk appetite also saw sterling gain against the US dollar as strong US and German economic data reduced demand for the safe haven US currency. Sterling’s relative strength is also being put down to an expectation that the UK will continue to hold onto its prized AAA credit rating whereas many see France and Germany at risk of downgrades. Out later today we have the minutes from the Bank of England’s recent meeting which could pour cold water on yesterday’s rally so call in now for a live exchange rate.

In the euro zone, a sharp drop in Spain’s short term borrowing costs saw the euro strengthen against the US dollar yesterday but the single currency still struggled against sterling. Better than expected German business confidence data also helped, but the picture is still a very gloomy one for the region heading into 2012 with many concerned that European policymakers are not doing enough to solve the European debt crisis. The failure of the recent EU summit to reach a solution and the apparent confusion between leaders, the ECB and the IMF as to the best route forward has been worrying markets.

In the USA, the US housing market showed some signs of recovery yesterday as new housing builds reached the highest level in over a year, increasing by 9.3%. Builders have struggled to compete with a wide number of cheap foreclosure properties, so this data helped to give risk appetite a boost across markets as investors saw a semblance of recovery in the US economy. Call in now for a live exchange rate.

Elsewhere, the Canadian dollar strengthened as inflation held steady at 2.9%. Most analysts feel that the Bank of Canada will look to start tightening monetary policy in the coming months. The Australian dollar also strengthened against the US dollar on better risk appetite and as the central bank minutes were less downbeat than expected.


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