Sterling
Sterling has had a "steady" week. It lost a bit of ground against the US dollar, held its own against the euro and gained against the commodity backed currencies. During the week there were some ups and downs as data was released but we did appear to be in a period of relative calm for sterling especially when compared to the first three months of this year. However this could all change next week with the release of first quarter GDP figures. Will the UK economy be subject to a triple dip recession? The Bank of England monetary policy meeting minutes revealed no change in the number of members voting for an increase in quantitative easing although analysts are predicting that when the new Governor takes up his post at the Bank of England in July, it will herald a fresh cycle of quantitative easing which is likely to undermine the currency further. During the week sterling did slip against the euro to a six-week low and looked susceptible to further weakness in light of continuing concerns about the British economy and following comments from the IMF who suggested it may be time for the UK to consider altering its current fiscal plans. Sterling lost ground against the US dollar as data released showed UK unemployment rates climbing while wage increases were lower than the level of inflation. Inflation data showed that headline inflation of 2.8% remained above the Bank of England’s target of 2.0%. Further negativity came yesterday as poor UK retail sales figures were released. We have a quiet day today in terms of sterling data but the IMF and G20 meetings taking place could well lead to a volatile market. Call now for the latest news and updates.
The recently mercurial euro started strongly this week before fears were raised that interest rates could be cut to record lows in the short to medium term. News that Cyprus is to sell off a chunk of its gold reserves also didn't help. However in mid-week it reached a six-week high against both the sterling and the US dollar, showing a broad firmness having been boosted by central bank demand and ground made against the Japanese yen. This however precluded its biggest daily drop in ten months as fears that interest rates could be cut to record lows began to materialise. Nonetheless the single currency found strong support yesterday at the psychologically important $1.30 level but remains vulnerable to political risks such as Italy failing to bring presidential elections to a conclusion and continued uncertainty over a bailout deal for Cyprus. Today sees German inflation figures released as well as a Eurozone current account report which will shed light on prevailing demand for the currency. Europe will also be thrust into focus with G20 meetings concluding over the weekend: call in now for how decisions could impact your euro price levels.
It has been a varied and eventful week for the US dollar as it responded to a mixed release of data. The currency performed poorly during the middle of the week in response to a falling US Consumer Price Index and relatively restrained inflation data coming out despite the 2.5 trillion dollars of quantitative easing that has been pumped into the US economy over the last 5 years. Whilst there was further fluctuation in both directions towards the end of the week after the Beige book indicated continued economic recovery, the US dollar ended up at back around the 1.53 mark against sterling and looked to be weakening towards 1.31 against the euro. A speech by the Governor of the Federal Reserve today could have an impact on performance throughout the day as could on-going developments in the G20 meetings. Call in now for live rates and up to date information.
Elsewhere, the Japanese yen rose on Monday for the first time in two weeks as people looked to a safe haven following lower than expected economic growth from China. There was also a slow performance from Australian and Canadian dollars, as well as all commodity backed currencies as metal prices suffered their steepest drop in a year with gold and crude oil prices especially suffering. The Swedish krona struggled midweek after its central bank revised down its path for future interest rates. The Canadian dollar continuing a prevailing slide to its lowest level in a month against the dollar after the Bank of Canada downgraded its growth predictions. How the currency reacts to today's Consumer Price Index figures and sale statistics data will be pivotal.
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