US bank stocks have dropped as a result of US President Barack Obama’s plans to curb the activities of the biggest banks in the US, undermining the dollar.
Pound Sterling – UK Markets
Sterling rose against a downbeat dollar early on, which has been destabilised after US President Barack Obama threatened Wall Street banks with fresh rules to curb excessive risk taking. However, these gains have been trimmed during the morning following UK retail sales data.
UK retail sales data this morning was much weaker than expected for December and was less than a third of the 1.1% rise analysts were expecting. This has dampened recent optimism regarding the UK economy and at 0932 GMT, the pound traded at GBP/EUR 1.148 and GBP/USD 1.622.
There is also broad feeling that, whilst QE stimulus measures may have ceased, the Bank of England is unlikely to raise interest rates until later in the year.
US Dollar – US Markets
"Never again will the American taxpayer be held hostage by banks that are too big to fail," said President Obama after laying out his proposed reforms. The dollar has suffered as a result, trading at 0.616 against the pound and 0.708 versus the euro at 0948 GMT, though it is holding steady at time of writing.
Overnight, the US Dow Jones industrial average fell 2%, its worst fall since October. Elsewhere shares in major US banks Goldman Sachs and Bank of America plummeted and UK politicians eagerly jumped onboard to say they’ll be doing the very same. What consequences this latest twist will have for cable in the long run remains to be seen.
Euro – European Markets
The growth sensitive euro remained under pressure today amid concerns that Greece will fail to contain its budget deficit along with the possibility of sagging Chinese growth.
The situation in Greece continues to sting the common currency, which currently trades at 0.87109 against sterling and 1.414 versus the greenback.
Other Currencies – Highlights
Crude oil is at a one month low trading near USD76 a barrel, despite a drop in US crude supplies as concerns over Chinese growth dampened appetite for riskier currencies and commodities.
Meanwhile the yen rose to a nine-month high versus the euro as President Obama's proposal to restrict bank’s risk trading discouraged demand for higher yielding assets.