Smart Daily Currency Note | The US dollar continues to weaken

Sterling

It was a somewhat mixed day for sterling yesterday as risk appetite was the main driver in the market. Sterling was slightly down against the euro and Swiss franc, but renewed confidence that a deal would be struck regarding the so-called fiscal cliff in the US drove sterling towards a high point close to 1.627, its highest level since September against the dollar. A broad swathe of inflation data was released, most of which slipped below projections, however, the crucial consumer price index data came in at 2.7%, nearly half a present over the forecast figure, which gave some support to sterling as it decreased the likelihood of more monetary easing in the short term. Today's financial news in the UK will be dominated by the release of the minutes from this month's monetary policy committee meeting which some expect to deviate from the recent unanimous decisions on interest rates. If the market reaction to last week's speech by the ECB president on changing interest rates is anything to go by, any change could see dramatic consequence. Get in touch now to find out which way sterling has moved.

Euro

The euro continued its gains yesterday as the euro looked a less risky proposition given recent reports on the European Central Bank's (ECB) new role as single banking supervisor and global risk appetite increased. The euro pushed through the 1.32 mark against the dollar reaching a 7 month high, which was matched by gains against the yen and the Australian dollar. Successful Greece and Spanish bond auctions also helped the single currency yesterday. The key data out today is a German survey on business conditions. Last month saw the first positive outlook in six months so a good set of data could support the euro further. However, some analysts suspect that there is very little to justify the euros period of strength and that we are due for a dramatic correction. Certainly poor results would cast doubts over the justification for current euro rate, so get in touch now to take the rates while it lasts. 
 
US dollar

The fiscal cliff continued to dominate the economic landscape yesterday, as it seems it will do until a concrete resolution has been agreed upon. Negotiations between the President and the Speaker of the House continue with the Speaker suggesting that he will go to Plan "B" if need be. The last time the US dollar was this weak  we saw a rapid reversal in its fortunes, including a 10 cent reversal for sterling back in April/May this year as traders viewed sterling to be "overbought". Important construction data is released today could look to start such a reversal, but reaction will most likely be muted in the current uncertain landscape. Get in touch now to take advantage of the US dollar rate while it lasts.

Worldwide

Elsewhere, the Swedish krona performed well yesterday following the central bank's decision to cut interest rate by 0.25% which was widely anticipated; but, implicated it would not be looking to cut interest rates in 2013. The Japanese yen suffered yesterday as investors sold off positions in traditional safe haven currencies and sought riskier assets. The Reserve Bank of Australia's monetary policy minutes revealed that it was not a clear cut decision to cut interest rates indicating that there should not be another rate cut in the short term.  Current account figures were announced from New Zealand overnight, as was Trade balance data from Japan. Today we will see whole sales data released from Canada whilst in the evening we will have GDP data from New Zealand.