Fresh Optimism Boosts the Pound

Sterling is continuing its strong position against the Euro and making gains on the US Dollar as more positive housing data comes to light.

Pound Sterling – UK Markets

News emerging about the UK housing market yesterday and today is likely to give a boost to investor confidence. Rising house prices are a positive sign, with average prices now being less than 10% below their 2007 pre-recession peak. The new emergency budget with capital gains tax changes pending may be crucial as to how things will play out in the long term. Leading the headlines is the Nationwide report which gives strong signals of rising house prices, suggesting the recovery is gaining momentum. The Lloyds Halifax unit are also expected to report today that the average home price has risen 0.3 percent from April. New car sales have also risen 13.5% in May compared with the same month a year ago. For now at least there seems to be growing optimism regarding the UK’s road to recovery.

US Dollar – US Markets

The US Dollar traded near a four year high against the Euro and has strengthened the most in two weeks against the Yen. A report due today is expected to reveal that US payrolls have significantly grown. This compliments the positive data released yesterday showing that jobless benefit claims have dropped and that US companies have added 55 000 new jobs suggesting that the US recovery is gaining pace.

Euro – European Markets

The Euro is sitting weakly against the Pound and Dollar as fears are mounting that the Eurozone debt crisis will damage the region’s banks and slow economic growth. Data has revealed that factory orders in Germany fell 0.2 percent in April – worrying news for the Eurozone’s largest economy. The Euro crisis will be the key subject of scrutiny at G20 talks today.

Other Currencies – Highlights

The Japanese Yen is still weakening following the resignation of the Japanese Prime Minister. A new Prime Minister, Naoto Kan has now been elected. Kan has so far shown a hard stance against the Bank of Japan and also favours a weaker Yen. G20 finance talks begin today in South Korea. Central banks across the world have identified investor reaction to the Euro crisis as a hindrance to raising interest rates. The G20 are expected to endorse Euro rescue deals.