Vulnerable US Economy in the Spotlight

The US Dollar has fallen against most major currencies following the release of minutes detailing Federal policy makers’ discussions of increasing risks to the dawdling economic recovery.

Pound Sterling – UK Markets

Sterling is still benefiting from the momentum of yesterday’s figures showing an improving job market. The reduction in the ILO unemployment rate and jobless claims has caused Sterling to hit a two year high against the US Dollar with the rate being 1.5327 at 11am this morning. This has also raised comments from several commentators that the UK will be able to avoid a ‘double dip’ recession.

US Dollar – US Markets

The US Dollar has tumbled against most other major currencies. Newly released FOMC minutes from the June 22nd-23rd meeting have revealed that policy makers discussed that the economic outlook had ‘softened somewhat’ following the wave of recent poor US data. Policy makers also discussed whether additional stimulus will be required if the trend continues and growth forecasts have been narrowed for both this and next year with the anticipated GDP range being brought down from 3.2-3.7 percent to 3.0 percent to 3.5 percent. The minutes were coupled with the news that retail sales dropped 0.5 percent in June. Further reports are due today which may add fuel to the fire as economists are expecting a fall in industrial production in June for the first time in a year and a slow down in the New York manufacturing area.

Euro – European Markets

The Euro has retreated from Wednesday’s gains on Sterling and movement overnight between the pair has been volatile. Gains on the US Dollar have been significant with the Euro sitting at 1.2786 at 11am this morning. There has been concern voiced over the high amounts of borrowing by Spanish banks from the ECB which hit a record high in June. Portugal however, has managed to sell some short and medium term bonds.

Other Currencies – Highlights

Growth in China slowed to 10.3 percent in June. This, along with the slowing US recovery, has caused investors to turn to the Japanese Yen as a haven causing it to strengthen. China’s news has also caused the Australian Dollar to drop due to the fact that China is Australia’s largest trading partner and the chief buyer of its iron ore exports. For a live quote or to tell us about your foreign exchange requirements, please call us on +44 (0)20 7740 0000.