Will Europe Reveal Further Support Measures To Help Push Up Euro?

Euro uncertainty continues as the Irish rescue package still hangs in the balance pending the December 7th budget and with a Portuguese bond auction due today. Ratings agency Standard and Poor’s yesterday put Portugal on credit watch, with the need for rescue funds thought of as increasingly likely. The Euro yesterday traded at a two month low against the Pound. However, it has been gaining ground so far today, with some suggesting that the European Central Bank will today reveal moves to increase support measures that had been in the process of being withdrawn.

Pound Sterling – UK Markets

The Pound has been falling against the Euro so far this morning but gaining on the US Dollar. Falling house prices are once again in the headlines following the Nationwide report described the continuing trend with prices at a nine month low. House prices dropped 0.3 percent last month following a drop of 0.7 percent in October with the average price now being £163,398. The year on year increase is now at its lowest since September 2009 at 0.4 percent. On a positive, UK PMI manufacturing data this morning at 9.30 am has been very strong. It was expected to show a reading slightly down from October’s reading of 54.9 but instead came out at 58.0 which has see an instant upwards lift on the Pound but the day will show whether this is a short term movement or not.

US Dollar – US Markets

The largest influence on the Dollar is still its position as a safe haven currency as the uncertainty over European debt continues with Spain, Portugal and Italy all being scrutinised for debt levels. The US Dollar also experienced some positive data in the key area of consumer confidence yesterday which has reached a five month high. This seems to suggest that the quantitative easing decision and moves taken by the Federal Reserve to ensure stability and continued growth have worked to shape positive sentiment towards the economy.

Euro – European Markets

Having fallen to a two month low against the Pound as the European debt crisis deepens, the Euro has been gaining so far today with some raising their expectations that the European Central Bank will today make clear their commitment to increasing support measures. It is thought the European Central Bank may be forced to reverse its recent policy of withdrawing support measures and instead take a move such as large-scale bond purchasing as hinted at by Trichet yesterday. The potential move comes on the same day as a Portuguese bond auction in which the Government are due to auction 500 million Euros of bonds. This will be closely watched by markets to interpret the level of interest in the nation widely earmarked as the next to require bail-out funds, with Standard and Poor’s yesterday placing the nation on credit watch. Strong German retail figures have been released today showing 2.3 percent growth for October, far above the predicted 1.2 percent. At the moment however, strong economic growth data from Germany can do little alone to help the Euro, when the contrasts in the strength of the various nations is one of the key problems emerging.

Other Currencies – Highlights

Both Australia and Canada have revealed GDP figures for the third quarter revealing slowing levels of growth. Both of these nations found that the rising strength of their respective currencies, linked to commodities, dampened exports. Australian GDP rose just 0.2 percent during the third quarter down from growth of 1.1 percent in the previous quarter as higher interest rates also hit Australian consumers. The Canadian Dollar fell to its lowest levels in three months against the US Dollar as GDP figures came in lower than expected at 1 percent in the third quarter compared to 2.3 percent in the previous quarter. For a live quote or to tell us about your foreign exchange requirements, please call us on +44 (0)20 7740 0000.