Risk aversion rises
It was a low key day for markets yesterday with trading remaining largely range bound as risk appetite fell following weak US labour market data. Markets remain cautious at present amid fears that the global rally is running out of steam and this is supporting US dollar and yen currency rates at the expense of the pound at present.
Pound Sterling – UK Markets
Sterling has opened the day on the back foot amid a risk adverse market, falling against all its major currency partners. Currency rates for the pound are currently trading in the region of 1.65 against the US dollar and 1.11 against the euro.
The pound is weaker this morning after an “ambitious” budget plan is required to keep interest rates low in the UK as government debt continues to rise. Housing registrations in the UK have hit their highest level since July, although prices are expected to fall until 2014 as the market cools from previously overheated levels. The pound shed 1% against the euro in the wake of the Bank of England minutes and remains at low levels this morning. There is no major data in the UK today.
US Dollar – US Markets
Currency rates for the greenback are stronger this morning as investors revert back to the safe haven currencies. The US dollar is currently trading higher at 0.67 against the euro and 0.60 against the pound.
US jobless claims came in weaker than expected yesterday, rising by 561 100 in the week to November 7 while leading indicators were also weak, coming in at 0.3%. The Philadelphia Fed is stronger however, rising to 16.7 after a reading of 11.5 the previous month. Sentiment in the US is weak at present amid fears that economic momentum is faltering after a strong third quarter. There is no major US data today.
Euro – Euro Markets
Euro exchange rates have also dipped this morning against the US dollar and yen as risk aversion in the market rises. The single currency is trading stronger against its higher yielding partners, including the pound, Aussie and Kiwi dollars.
The euro gained 1% against the pound yesterday after weak Bank of England minutes led investors to the perceived safety of the euro. Germany's producer price index came in this morning weaker than expected, falling at an annual rate of -7.6% while remaining flat in October. Next week we can expect euro volatility with the German purchasing manager index and GDP figures due on Monday and Tuesday.
Other Currencies – Highlights
Currency rates for the Aussie and Kiwi dollars are weaker this morning, heading for weekly losses against the greenback amid speculation that the global rally may be running out of steam. Weak growth is expected to keep interest rates in the major economies low and with interest rates at 3.5% and 2.5% respectively, this could serve to benefit the Aussie and Kiwi dollars. The Australasian currencies have also fallen against the yen for the first time in three weeks.