Sterling maintained a firm stance against the euro this morning following yesterday’s unanimous BoE decision to pause asset purchases. Meanwhile the euro has again come under broad selling pressure, staying weak against the dollar.
Pound Sterling – UK Markets
Earlier this morning the pound was up slightly against the euro at 0.8673 pence, not too far off its February highs. Since then sterling has dipped, despite analysts predictions of further euro weakness. Even with the unanimous decision to pause QE, sentiment towards the pound remains precariously balanced, as further asset purchases may be needed in the medium-term.
Sterling has also dropped off around 0.5% against the dollar at 1.5602 as the greenback benefited from strong US data.
Sterling will be in the spotlight to some extent today, with the release of Public Finance data for January, which is expected to paint a typically murky picture, but could show some improvement as the restored VAT rate, and last minute tax payments for the previous tax year get factored in.
US Dollar – US Markets
The greenback advanced against 14 of the 16 major currencies in anticipation of US reports due later today including PPI figures, unemployment claims and the Philadelphia Fed Manufacturing Index. Notably, almost all of these releases are expected to be higher than their previous figures meaning the greenback could continue to show further bullishness.
Traders should keep a close eye on the market today, as there may well be some good opportunities to capitalise on the fluctuations which will likely follow these releases. As things stand at 1030 GMT, the dollar trades at 0.7365 versus the euro.
Euro – European Markets
The euro continued to fall slightly yesterday, regardless of the fact that European finance ministers gave Greece a one-month reprieve on Tuesday (until March 16th) to show its deficit reduction plan was being rolled out effectively.
Since the start of the year the euro has fallen almost 5% against the dollar on concerns about Greece's fiscal health and the plight of a handful of its fellow Euro-Zone nations. Currency speculators raised net EUR short positions to a record high last week.
Other Currencies – Highlights
The yen rose for the first time in five days against the dollar on speculation that Japanese companies bought the currency after it fell to a four-week low of 91.38 yesterday. Large manufacturers anticipate that the yen will average 91.16 per dollar in the six months to March 2010, according to the Bank of Japan’s quarterly Tankan survey.