The Pound fell to a six week low against the Euro yesterday but is re-gaining ground today due to heightening concerns over European banks.
At 9.30 am GMT, Sterling was trading at 1.5367 against the US Dollar and 1.2043 against the Euro.
Pound Sterling – UK Markets
The Pound is rising against the Euro and starting to claw back ground on the US Dollar after a sharp drop yesterday evening. The latest retail news could have been taken either way by markets as the British Retail Consortium has identified a year on year 2.8 percent rise in sales for August led by strong ‘back to school’ clothing sales. Whether this can convince the markets however remains to be seen throughout the rest of today as these figures benefit from being compared with very poor sales of a year ago. This data has also come out alongside data for new car registrations which has fallen 17.5 percent from a year ago not therefore building a very hopeful picture of the UK economy. Retailers will be hopeful that consumer confidence does not fall with the upcoming VAT rise.
All this, on the day when budget cuts couldn’t be more in the minds of those in London as the underground tube workers’ strikes over redundancies and pay brings chaos to the commutes of millions of workers in the capital.
US Dollar – US Markets
Yesterday saw reduced holiday trading on Labor Day and the Dollar has held steady and is advancing on the Euro significantly so far today.
The ‘beige book’ is due in the US which provides an overview of the US economy in the twelve Federal Reserve Districts via interviews with key economists and businesses; apart from last week’s surprisingly better than expected jobs figures the picture is likely to be negative given recent news pointing towards the possibility of a second dip to the recession.
Euro – European Markets
The Euro is weakening amid renewed fears that debt-risk is going to damage European banks and the recovery as Germany’s banking association may need a further 105 billion Euros. Optimism over Friday’s US jobs figures which provoked investors to purchase the riskier Euro has also begun to dwindle.
The European Commission President, Jose Manuel Barroso, has made his first ‘state of the union’ speech, an idea similar to that in the US. Outlining the priorities of the EU he conceded that the ‘recovery is gathering pace, albeit unevenly within the union’. The speech is unlikely to have as much impact on the currency as the key finance meeting taking place between European finance ministers. Discussed will be plans for an EU-wide strategy of regulation to prevent another crisis and Greece will find out if they have reformed sufficiently to receive more funding from other EU nations.
Other Currencies – Highlights
Japan’s Central Bank have kept interest rates unchanged at 0.1 percent giving the reasons as uncertainty over the US economy and instability in speculative foreign exchange and stock markets.
Australia have also kept interest rates the same at 4.5 percent again due to an uncertain global outlook.
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