In a week where the Irish banking sector has raised concerns, the health of the economy now looks more frail than feared. The Irish economy which was expected to grow by 0.5 percent in the second quarter has in fact shrunk by 1.2 percent.
At 10am this morning Sterling was trading at the mid-market rate of 1.1735 against the Euro and 1.5691 against the US Dollar.
Pound Sterling – UK Markets
The Pound’s movements against the Euro remain volatile but the Pound has begun to claw back some of the losses of the past three days. The Pound has also strengthened against the US Dollar although movements are still varied.
Morgan Stanley have drawn attention to the fact that the UK’s budget cutting plans may crimp growth by raising its year end forecast for the Euro against the Pound.
US Dollar – US Markets
The US Dollar has begun to regain losses against the Euro following data that has come in above expectations with existing home sales growing by 7.6 percent in August.
On the negative side, unemployment claims did not meet the predicted fall to 450,000 instead rising by 12,000 last week to 465,000.
Today sees durable goods orders data which measures the costs of goods orders such as cars to manufacturers. This is expected to show a drop highlighting the struggling sector.
Euro – European Markets
The last few days have boosted the Euro and the currency still remains in a relatively strong position.
German business confidence unexpectedly rose to a three year high in September with the expansion of the Eurozone’s largest economy occurring at the fastest pace in two decades in the second quarter led by exports.
The news on Ireland however may continue to heighten concerns. The Irish Government have been trying to calm fears this week about the Irish banking sector after a report emerged that Ireland may need external financial help. GDP figures have now been released to reveal that the Irish economy shrank by 1.2 percent in the second quarter – these did not meet analyst’s expectations for growth. This compares to growth of 2.2 percent in the first quarter. GNP (Gross National Product) fell by 0.3 percent.
Spanish Finance Minister Elena Salgado is presenting the Spanish budget later today and is under pressure to reassure investors that Spain is not soft on austerity measures.
Other Currencies – Highlights
Japan is once again in the headlines as speculation from traders mounts that the Government intervened in the currency markets to depreciate the Yen which was seen in a sudden jump in the Dollar’s value last Friday. It is thought that the Bank of Japan began buying Dollars on a large scale for the first time in six years last week although the Bank of Japan has not confirmed this. The move is to protect the Japanese export market.
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