The euro hit a three week high against sterling this morning, although investors remain apprehensive ahead of a key European Union meeting which could shed light on a possible bailout for Greece. The US dollar received a boost yesterday following reports that the Federal Reserve would soon raise discount lending rates.
Pound Sterling – UK Markets
Sterling was down versus the euro this morning, under pressure in the wake of yesterday’s dovish BoE inflation report. The report forecast that price increases would be well below its 2% target in two years time if interest rates rise as the markets currently predict. Governor Mervyn King amplified the dovish tone, saying it was "far too soon to conclude that the Bank's quantitative easing programme was over".
The pound has been further downtrodden today against the single currency by prospects of a bailout for Greece and at 0946 GMT traded against the euro at 1.1340.
US Dollar – US Markets
The dollar is forecast to continue its uptrend today, particularly against the euro. Investors are keeping their distance from the ailing single currency, ahead of the EU policy meeting.
FED Chairman Ben Bernanke made an announcement yesterday which led investors to believe that US economic policy would tighten at a faster rate then its major counterparts. The dollar index rose to 80.80 as a direct result of the announcement. Currently the greenback is up against the euro and pound with the pairs trading at 1.3755 and 1.5587 respectively.
Weekly American unemployment claims are due for release at 1330 GMT. With the number of Americans who filed for first time unemployment insurance forecasted to drop, traders can perhaps expect the greenback to receive a further boost in afternoon trading.
Euro – European Markets
The euro managed to gain some ground against sterling overnight and this morning broke through its 200-day moving average as it rose ahead of an EU summit that may produce a plan to solve Greece's fiscal troubles.
Despite its comfortable rise today, the signs don’t necessarily look good for the euro, with many concerned that a bailout will prompt reaction from other EU states with similar problems. German politicians from the Free Democratic Party have voiced their displeasure, saying that bailing Greece out would be akin to “helping an alcoholic with another bottle of schnapps.” The picture will certainly appear a little clearer this time tomorrow.
Other Currencies – Highlights
The Australian and New Zealand currencies were up across the board as signs of a stronger economic recovery and assurances over European nations’ debts boosted demand for stocks and higher-yielding assets. Against sterling, current levels are seeing 1.7548 and 2.2275 respectively