Down, down, down for sterling | Smart Daily Currency Note

Sterling

The bad news keep on coming as sterling fell sharply yesterday, dropping to a 15 month low against the euro and its lowest since June 2013 against the US dollar. This happened after the Bank of England (BOE) minutes showed that three members on the Monetary Policy Committee (MPC) voted for expanding the current levels of quantitative easing. Furthermore the minutes revealed that there had been discussions about potentially cutting interest rates; although all members voted against a cut in interest rates. Unemployment data came out with a mixed signals. The number of people claiming unemployment benefits dropped by more than expected, but the jobless rate came out worse than predicted with a  unemployment rate now reaching 7.8%  in January. Out today we have the latest figures on Public Sector Net Borrowing and Industrial Order Expectations from Confederation of British Industry (CBI). Plenty of scope for further bad news for sterling. Not that long ago we were wondering if sterling would fall below 1.20 against the euro - under 1.14 seems very likely now! Call in today for the latest news and a live rates from our traders.

Euro

A mixed bag for the euro yesterday particularly in the shadow of the US dollar's very strong performance. The euro reached a 15 month high against sterling following the minutes from the most recent monetary policy meeting in the UK but struggled against most of its' other major currency partners. The German Chancellor’s statement that a EUR/USD rate between 1.30 and 1.40 was 'normal' gave some confidence in the market that the euro was not overbought. The markets will also be looking at Eurozone political developments this week, with a general election in Italy on the 24th-25th February and with Cyprus also probably heading to a second round of Presidential voting on the 24th as well. While the markets are probably assuming victories for pro-reform parties and/or coalitions, the potential remains for surprises, in Italy in particular. Should former Prime Minister Silvio Berlusconi win enough votes to achieve a hung parliament, political uncertainty will return in Italy and may dampen euro sentiment. Get in touch now for the latest news and an up to the second quote.

US dollar

The US dollar performed extremely well yesterday reaching fresh eight month highs against sterling. Poor inflation data from the US as well as declining housing starts promoted risk aversion in the global markets. Other data released yesterday showed that building permits increased at their quickest pace since June 2008. Yesterday evening we saw further dollar strength 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. Today we see the release of core Consumer Price Index data (CPI), weekly unemployment claims figures, existing home sales data and the Philly Fed Manufacturing Index being released in the US. Call now for the latest news and updates.

Worldwide

Elsewhere, the New Zealand dollar was the worst performer out of the major currencies yesterday 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. Another combatant for the currency war. The Swedish krona performed relatively well yesterday, reaching a 20 year high against sterling! There is little data expected to be released today, but, the Governor of the Reserve Bank of Australia (RBA) is speaking late this evening. Call in now for a market update and a live quote.