Sterling
Yesterday proved the theory that it is easier to talk down a strong currency e.g. the euro rather than boost a weak currency e.g. Sterling as the European Central Bank President hinted at possible euro interest rate cuts. This resulted in Sterling having a strong end to the week - pushing back above the 1.17 level against the euro and the 1.57 level against the US dollar. The incoming Governor of the Bank of England Mark Carney gave evidence to a committee of MPs and he quelled speculation that he would look to extend stimulus programs (which would further weaken sterling), saying that it is "entirely…probable that the current stance of policy is consistent with the economy achieving escape velocity." The Bank of England later held interest rates, implying that the Monetary Policy Committee also agree that, given time, the status quo will suffice. Other data released this week produced much better than expected Services Purchasing Managers Index (PMI) but the construction figures disappointed the market. Today is not likely to hold as much excitement, the key question being, with very little data released; can the pound hold the ground it has won back? Get in touch to find out.
Euro
The euro bubble sprang a leak yesterday after the President of the European Central Bank admitted that recent strength of the euro could hurt Eurozone’s economy. The euro fell across the board, losing over 1% to the pound, trading over 1.17 for the first time in a week and dropping below 1.34 against the US dollar. The ECB also held interest rates on Thursday and the President of the European Central Bank remarks have raised the possibility, albeit slight, of a rate cut in the coming months – this would please the French President who had already warned that a strong currency could deepen the recession and called for an exchange rate policy to be implemented. Political turmoil in Italy and Spain has also sent some shockwaves through Europe this week. The Spanish Prime Minister is being called upon to resign following reports suggesting a corruption scandal and Berlusconi - the ex-Italian Prime Minister – has emerged as a front runner for the next general election causing more uncertainty as to which party will win the election race. The Economic Summit continues today, so expect the volatility to continue as traders listen for snippets of information from Eurozone ministers. Call in now for the most up to date news, and to see if the leak has been stemmed. The US dollar has had a relatively strong week – reaching an 8 month high of 1.5630 against sterling, a 2 week high of 1.3380 against the euro and is headed towards the 94 line against the Japanese yen (already at a three year high). This week, a speech from President Obama sought to limit the size of the super cliff by addressing matters before it really comes to a fore. Unemployment data released was more or less as expected as was the outcome of Services PMI data showing an industry expansion figure of 55. Important import/export data released today should show more positive data from the US as the States look to play-down fears surrounding the US fiscal cliff. Call in now for an update and to get a live price from your trader.
Elsewhere, the Japanese yen was the big story of the week- breaking through the 93 level against the US dollar for the first time in three years following the news that the Governor of the Bank of Japan planned to step down early; accelerating a transition that may aid the new Prime Minister's monetary easing plan coming sooner rather than later. The Canadian dollar rose to a 2 week high on Wednesday, but slipped away as risk aversion and weak fundamentals brought prices down. The Australian dollar has continued to lose ground this week, falling to the lowest since November against the dollar this week with some analysts forecasting the fall to continue as traders suspect further easing measures. Get in touch now for the latest news and prices.
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