Bank of England split
The pound declined throughout the day yesterday as the Bank of England minutes revealed the committee is split on the future of QE. Weak US housing market data sent equity markets around the world lower and the Nikkei index dropped to a four-month low after weak data from Mitsubishi. Today markets will be interested in UK borrowing figures and retail sales, as well as US labour market data.
Pound Sterling – UK Markets
Currency rates for the pound are mixed this morning, falling against the US dollar and rising against the euro, Aussie and Kiwi currencies as risk aversion rises in the market. Sterling is currently trading at 1.66 to the US dollar and 1.12 to the euro.
Sterling slipped against the US dollar yesterday after the Bank of England minutes showed members were split on QE and this was interpreted as dovish by markets. The MPC left the door open for more QE in future and the uncertainty saw the pound shed half a cent against the US dollar before recovering with inflation figures later in the day. Retail sales are due in the UK today and these are expected to rise 0.6% on the month.
US Dollar – US Markets
The US dollar has risen sharply in early trading this morning, gaining against all its major currency partners with the exception of the Japanese yen. The dollar is currently trading at 0.67 to the euro and 0.59 to the pound.
A fall in US housing starts sent stocks lower in the US today, snapping three consecutive days of gains and tipping equities from a thirteen-month high. Housing starts fell by 0.53 million in the year to October while inflation figures have come in at 0.3% on the month. US sentiment is still fragile following the comments from Ben Bernanke earlier in the week and business software makers Autodesk, as well as Microsoft and Exxon Mobil have also reported a cautious output for the fourth quarter. Jobless figures in the US are due today.
Euro – European Markets
Euro exchange rates have fallen sharply against the US dollar this morning, which rose on the back of risk aversion internationally. Against its other currency partners, exchange rates for the euro remain mixed, currently trading at 1.48 against the US dollar and 0.89 to the pound.
European shares have also been dragged lower by weak US housing starts and comments from the ECB's Trichet which echoed those of Ben Bernanke earlier in the week. The euro remains largely range bound against the US dollar after a better than expected trade surplus, though is failing to find sustained support above 1.50. The Swiss trade balance is due today, with the German producer price index out tomorrow.
Other Currencies – Highlights
Exchange rates for the Japanese yen are higher this morning, rising along with risk aversion in the market. The Nikkei index has trimmed recent gains this morning, falling to a four-month low after Mitsubishi announced substantially weaker fundraising figures. The yen is currently trading at 89.09 to the US dollar and 148.89 to the pound.