Another poor week for sterling, the US dollar is in the ascendancy | Smart Daily Currency Note

Sterling

After another poor week for sterling dropping against all of its major counter parts and falling  at one stage to a 15 month low against the euro and an 30 month low against the US dollar. The Bank of England (BOE) minutes revealed that three members on the Monetary Policy Committee (MPC), including the Governor of the BOE, voted for expanding the current levels of quantitative easing plus there had also been discussions about potentially cutting interest rates. More negativity was evident on Tuesday when rumours spread of a potential downgrade for the UK’s gold plated AAA credit rating. Whilst the overall unemployment rate did reach 7.8%  in January, there are definite signs that the labour market is starting to recover. Employment reached an all-time record of 29.73 million in the last quarter of 2012 and the number of new people claiming unemployment related benefits dropped by more than expected. Sterling started to recover some of its losses yesterday as more positivity came when the Public Sector Net Borrowing figures came in better than expected with a surplus in January of £11.4bn (the largest in 5 years) and Industrial Order Expectations from Confederation of British Industry (CBI) were better than initially anticipated. With no significant data expected to be released today, you might expect a stable day for sterling; however, recent activity tells us how volatile and how unpredictable the markets can be, so call in today for the latest updates on sterling.

Euro

The euro has had a mixed week, starting off on the front foot following comments from an ECB Governing Council member and the German Chancellor who said that there was no need to intervene to weaken the euro as it was in a normal range.  The six month economic sentiment surveys for Germany and the Eurozone were much better than expected with the German figures reaching a three year high. Yesterday we saw some unexpectedly poor manufacturing and services Purchasing Managers' Index (PMI) data across Europe which  caused the euro to fall against the majority of its major currency pairs. Traders eyes will now be geared firmly towards the Italian elections this weekend. Should former Prime Minister Silvio Berlusconi win enough votes to achieve a hung parliament, political uncertainty will return and this could unsettle the euro. The euro remains in a strong position against sterling in particular, but today  will see the release of German business climate data and a EU economic forecast for the next 2 years for the Eurozone's member states. Both sets of important information which will inevitably have a heavy influence on the euro. Get in touch now for the latest news and an up to the second quote. 

US dollar

The US dollar started off quietly this week, trading in fairly a narrow range due to lack of data released in the states and the markets being closed for Presidents' Day. However, it made strong gains later in the week reaching a 30 month high against sterling and a one month high against the euro following the release of the latest Federal Open Market Committees (FOMC) meeting minutes. The minutes outlined that the Federal Bank should be prepared to vary the pace of quantitative easing, thus normalising monetary policy – a sign that the central bank is looking at tightening monetary policy going forwards. The minutes however, didn't indicate as to when quantitative easing may end. Yesterday we saw the release of core Consumer Price Index data (CPI) and existing home sales data which came out better than expected. It wasn't all positive as the weekly unemployment claims and the Philly Fed Manufacturing Index came out worse than forecast. We have a quiet day in the states today although one of the members of the FOMC is speaking in the afternoon. Call now for the latest news and updates.

Worldwide

Elsewhere, the New Zealand dollar was one of the worst performer this week following comments from the Governor of the Reserve Bank of New Zealand (RBNZ) who suggested that the central bank may look to intervene if the New Zealand dollar’s current strength persists. The Japanese yen had a mixed week after the G20 failed to single out Japan for its recent policies which have promoted yen weakness; but, comments from the finance minister who rejected the prime ministers idea of buying overseas bonds saw the yen rally. The Turkish lira struggled after the central bank cut interest rates by 0.25%. The Australian dollar performed fairly well following the minutes from the most recent monetary policy meeting indicating that another interest rate cut was less likely. Out today we have inflation data and retail sales data from Canada, so call in now for a market update and a live quote.