Sterling soars this morning as Prudential deal falls through

Prudential, the UK’s biggest insurance company’s planned $35 billion takeover of US insurer AIA is to be scrapped causing Sterling to soar so far today. The GBP/EUR rate reached 1.2008 and the GBP/USD rate 1.4670 at 10am this morning. There is a high chance this could be a temporary boost so it is strongly advised to speak with your broker today regarding any upcoming transfers from Sterling to another currency and to discuss whether to book the trade or fix the rate for the future.

Pound Sterling – UK Markets

The Pound has strengthened as Prudential’s takeover of AIA has fallen-through after a lower price for US insurer AIA failed to be reached. The Pound is sitting at its strongest level for three weeks against the dollar so far this morning. It has also appreciated against the Euro to the highest rate since December 2008. The strong performance of the Pound today is thought to be due to hedge deals made on the back of the planned Prudential deal now unwinding, causing money to flow from the US Dollar and back into Sterling. For this reason, the strength of the Pound may only be temporary. However, further reports due today may add confidence to the Pound. For example a report is anticipated to reveal that UK construction has expanded at the greatest rate in over two years.

US Dollar – US Markets

The US Dollar has gained against the Canadian Dollar and hit a fresh four-year high against the Euro. The fall-through of the Prudential deal has, however, caused it to drop against Sterling. US data released today is expected to show positive rises in the number of contracts for previously owned US home purchases.

Euro – European Markets

European stocks have fallen as the US have begun investigations into the oil spill on the Gulf of Mexico by BP Plc, Europe’s second largest oil company. The Euro is sitting very weakly against the Pound this morning and has also fallen for a second day against the Dollar on concern that moves in the Eurozone to hamper budget deficits could actually hinder economic revival. It was revealed yesterday that unemployment in the Eurozone reached 10.1 percent in April. This is the highest rate in twelve years.

Other Currencies – Highlights

The Japanese Yen and Asian stocks have tumbled on the resignation of the Japanese Prime Minister Yukio Hatoyama. This follows the departure of one of the parties from the Japanese coalition Government. Although the coalition can still stay in power due to a majority in the lower house, these developments give some indication of political uncertainty to investors. This is expected to continue to negatively affect the Yen which has until now been seen as a safe haven currency in the Euro crisis. The Canadian Dollar has fallen against the Dollar and most other major currencies following an interest rate rise in Canada. Canada is the first in the Group of Eight leading nations to raise rates since the global recovery began. It has increased overnight lending rates between banks to 0.50 percent.