Euro Swings Back Up But Remains Volatile

The Euro has turned around its recent losing streak, gaining on both the Pound and the US Dollar in the past twenty-four hours as risk appetite has re-surfaced in the wake of positive global data such as better than expected US jobs figures yesterday. The single currency is still likely to experience volatility as markets decide how to react to comments from Trichet in response to the debt crisis that the ECB will be delaying the withdrawal of stimulus measures with interest rates likely to stay at record lows for the foreseeable future.

Pound Sterling – UK Markets

The Pound has fallen back against both the US Dollar and the Euro despite positive PMI manufacturing data giving the Pound an initial lift yesterday. This is very symptomatic of the present situation where what is happening in terms of the broader markets is steering currency investors in terms of their positions. PMI construction data today also came in slightly higher than expected but has failed to have a significant impact. The worrying housing sector will be in the limelight again tomorrow morning with a Halifax housing price report.

US Dollar – US Markets

The US Dollar has begun to suffer as its recent position as a safe haven has worn off with funds flowing back into the Euro. Following yesterday’s positive employment change statistics, today has brought more gloomy stats on jobless claims which have risen to 436, 000 from 410,000. The ongoing jobs figures this week may continue to affect things with non-farm payrolls which typically prove their significance due tomorrow. Yesterday’s figures from ADP, the payroll processing firm, suggested that 93,000 private sector jobs had been added in November which was the biggest gain in three years. Today however has shown rising unemployment claims so tomorrow’s data will be important.

Euro – European Markets

As speculation increases that the ECB will purchase bonds from debt laden European countries and do a U-turn on their policy of removing support measures, the Euro has shown some strengthening. ECB interest rates were announced at 1 percent again in line with forecasts. Today’s European Central Bank meeting will result in a close dissection of Trichet’s words for clues as to which way monetary policy might move. It was suggested that the ECB’s governing council will continue with a plan of emergency measures and maintain low interest rates. The Euro was also helped by Spain’s earlier bond auction which resulted in the sale of 2.5 billion Euros and yesterday’s Portuguese bond auction also proved that demand was better than expected.

Other Currencies – Highlights

The Australian Dollar has tumbled lower as a poor set of data has followed on from its weaker third quarter growth figures. The retail data has shown that sales fell by 1.1 percent in October compared with an estimate of 0.4 percent. Australian exports also rose by 1 percent in October while imports fell by 3 percent – very symptomatic of the rising currency. For a live quote or to tell us about your foreign exchange requirements, please call us on +44 (0)20 7740 0000.