Markets recover ground
Pound Sterling - UK Markets
The pound has gained against the euro and dollar this morning, currently trading above 1.11 and 1.47 respectively as markets take a positive turn with the improvement in US consumer sentiment. The pound has climbed nearly 1% on the yen and is weaker against the Australian and Kiwi dollars which have also benefitted from a rise in risk appetite.
The general trend in sterling remains marginally positive, only interrupted by bouts of risk aversion internationally. Bank lending is increasing in volume and RBS economists claim the recession could be reaching a mature phase. Signs that the US property market is approaching a bottom bode well for a return to growth in early 2010 and mortgage approval figures will be the crucial data to watch for this. However, risk appetite remains the dominant theme internationally and the extent to which this affects currency exchange rates depends largely on how swine flu develops. In the UK today, results of the GFK consumer confidence survey are released with nationwide housing statistics due out tomorrow.
US Dollar - US Markets
The dollar has fallen away this morning against the euro and pound, as a rise in risk appetite internationally increases distribution among the higher yielding currencies. The dollar is 0.5% down against the pound and 0.25% lower against the euro and has also lost over 1% of its value against both the Australian and New Zealand dollars.
US consumer confidence rose in April to its highest level since November. This boosted markets yesterday as it appears the US economy could be approaching the low point of its cycle. The general trend in equities continues to see-saw between negative data at present and the prospect of recovery in future. Today markets will focus on GDP figures and minutes from the FOMC meeting released in the US. GDP will be important for global economic sentiment and the FOMC minutes will be closely scrutinized for signs of introducing quantitative easing. Swine flu and continuing concern over the banking sector is keeping investors flighty and we could see more volatility before the week is out.
Euro - European Markets
The euro has climbed above 1.32 on the dollar and 127 on the yen as investor confidence grows. The euro has declined against the pound, Australian and Kiwi dollar, trading at 0.89, 1.8 and 2.3 respectively this morning.
Corporate giants in Europe have posted a series of profit losses as recession takes its toll on some of the world's largest companies. Profits at Royal Dutch Shell dropped 58% in the first quarter and steelmaker ArcelorMittal's profits have nearly halved. French Telecom and software giant SAP also posted large declines. The Eurozone PMI for retail sales has risen to 48.4 in April with Germany, France and Italy all reporting an improvement in consumer sentiment. Economic confidence has improved to 67.2, rebounding from record lows and industrial confidence is up to -35 from -38 last month. The ILO unemployment rate and retail sales figures for Germany are out tomorrow.
Other Currencies - Highlights
The Australian and New Zealand dollars have risen overnight, consolidating against the US dollar and pound as a rise in consumer confidence in the US improved investor sentiment. Weak commodity prices and flighty investors continue to weigh on the commodity based Australian and South African economies while the New Zealand dollar is under pressure ahead of the RBNZ interest rate announcement tomorrow. A base rate reduction of 0.5% is expected and whether New Zealand will embark on quantitative easing is unclear at this stage. The yen has declined overnight as more positive economic figures from the US reduce demand for the safe haven. Japanese industrial production figures are out today and the Bank of Japan interest rate decision is due tomorrow.