Sterling fell to a three-week low against the euro and hovered near multi-month lows against the dollar on Tuesday as data showed the UK trade deficit unexpectedly widened to its highest in nearly a year. Meanwhile, the euro has recovered on speculation European officials meeting this week will agree to assist Greece in tackling its budget deficit.
Pound Sterling – UK Markets
Sterling crept back from multi-month lows against the dollar early on, but has since dropped due to data showing that the UK trade deficit unexpectedly widened to its highest in almost a year. The pound has also lost ground against the euro as speculation regarding a rescue plan for Greece has bolstered the single currency.
Fears about sovereign debt risk, political uncertainty and a mixed bag of economic data all played their part in keeping pressure on the pound. Data this morning showed British retail sales recorded their worst performance in January in at least 15 years. However, other figures showed house prices extended their recent rise, albeit marginally.
The threat of a hung parliament, according to polls, continues to hang in the air on what seems to be a dark day for the pound.
US Dollar – US Markets
A meeting of EU leaders that could well result in an agreement to support Greece with its fiscal problems has curbed demand for the dollar as a refuge. However, it continues to hold steady and support recent gains.
Today's news may not have the impact needed to push the greenback out of its currently flat trend. However, if the minor reports that do emerge turn out to be dollar positive, its bullish movement of late may well continue, especially with hawkish remarks from Fed members such as James Bullard, who said that he does not see further mortgage backed securities purchases beyond March.
USD/EUR currently trades at 0.7284.
Euro – European Markets
The single currency gained support this morning from a report that European Central Bank President Trichet left a meeting in Sydney early to attend a European Union leaders' summit on Thursday.
At the meeting, EU leaders are expected to have discussed the Economic roadmap of the Euro-Zone for the next decade. However, the problems surrounding Greece and other susceptible indebted nations will undoubtedly cast a dark shadow over the proceedings, especially now that the Greek trade unions have confirmed Wednesday’s 24-hour walk-out protest against Government austerity measures.
In the current situation and for the good of the single currency, a bailout would appear to be the only way to avoid a crisis, yet other nations would surely follow suit feeling that they too deserve support.
The euro has gained ground against sterling this morning to currently trade at 1.1349.
Other Currencies – Highlights
Australia’s dollar gained after central bank Governor Glenn Stevens warned against keeping interest rates too low for too long.
Meanwhile the Japanese slipped slightly on the ECB bailout speculation, reducing high demand for the yen as a safe-haven currency.
Dollar Weakens as Fed Turns Dovish, Eyes on BoE
Euro Plummets as Draghi Opens Door For Rate Cuts
British Pound Stays Under Pressure Ahead of Tuesday's Vote