The pound has made a slight recovery after yesterdays low against the dollar, as risk aversion clouds the market.
Pound Sterling – UK Markets
Sterling steadied this morning after plummeting yesterday following BoE Governor Mervyn King comments to a parliamentary committee that risks to the central bank's view of a gradual recovery remained to the downside and that restarting its asset buying programme cannot be ruled out.
AT 0959 GMT the pound traded at 1.141 against the euro and 1.545 versus the dollar. Fears of a double-dip recession have seeped into investors’ thought processes, which has made for an increase in risk aversion.
US Dollar – US Markets
The dollar fell for the first time in three days against the euro on speculation that the Federal Reserve will hold interest rates near zero to support growth in the world’s largest economy.
The greenback weakened versus 14 of its 16 major counterparts on prospects that Fed Chairman Ben Bernanke will rule out last week’s increase in the discount rate being a prelude to higher benchmark borrowing costs when he addresses Congress.
At 1026 GMT the dollar traded at 0.7387 versus the euro.
Euro – European Markets
After a series of European economic indicators came in below expectations yesterday, the euro saw losses across the board. EUR/GBP dropped over 80 pips before leveling out in overnight trading.
Concerns about the European states fiscal positions continue to weigh and adjusted German Q4 GDP data due this morning is expected to confirm that the German economy did not grow in the last quarter.
The Euro, trading at GBP 0.8758, is not forecasted to break out of its current slump today. With most analysts predicting a decrease in European industrial production from last month, the single currency will have a hard time attracting any risk taking among investors.
Other Currencies – Highlights
Yesterday saw several economic indicators in both Europe and the US come in below expectations. This resulted in a loss of investor risk appetite, leading to major gains for the safe-haven yen.
The yen increased significantly against the dollar, euro and pound, and is currently in position to continue on that course today, depending on the outcome of Fed Chairman Ben Bernanke’s testimony.