More news has hit the Euro-zone with Ireland being downgraded by Moody’s ratings agency. This due to concern that the nation will not be able to pay back its debts following weak economic growth. This has been reflected in some mild downwards movement in the Euro although the tunnel vision on interest rates is still providing broad support – as these ongoing debt issues from individual nations trickle through however, it may be possible that the build up will eventually detract the attention of the currency markets away from monetary policy. Stay updated with our daily news and your broker.
Pound Sterling – UK Markets
Sterling fell against the Euro throughout the second half of yesterday but has been picking up again this morning following the news that Ireland is being downgraded by Moody’s. It has also found further strength against the Dollar.
The news that UK consumer confidence has picked back up from record lows also helped the currency alongside comments by Bank of England Policy Member Andrew Sentance.
Sentance is already known as a rate hawk but made more comments yesterday to say that he was concerned that Sterling has weakened by a greater drop than is particularly helpful to the export market - and that inflation could exceed 5 percent.
US Dollar – US Markets
The Dollar index which measures the Dollar against a basket of other currencies has fallen to a sixteen month low coming under pressure from the view that the Federal Reserve will not raise interest rates any time soon.
This was also due to the US jobs report coming in much worse than expected with jobless claims rising to 412,000 and adding even more to the view that an interest rate rise will take a while to come.
The US Consumer Price Index is expected to have climbed to 0.5 percent today matching the previous month’s reading - therefore not particularly adding inflationary pressure to the Federal Reserve’s decisions on monetary policy.
Euro – European Markets
The Euro has moved lower against Sterling after Moody’s Investors Service decided to downgrade Ireland’s credit rating by two notches to Baa3 from Baa1. This has overshadowed news from yesterday that the European trade deficit had reduced.
Moody’s have also left Ireland’s outlook on negative watch meaning that future rating cuts are possible. Moody’s have estimated that the Irish financial crisis may end up costing Irish tax payers as much as 100 billion Euros.
The European CPI inflation figure exceeded forecasts coming in at 1.5 percent for the year on year figure. Despite making minor losses, the Euro is at present at least remaining broadly supported by the fact that the European Central Bank may make a second rate increase.
Other Currencies – Highlights
The Swedish Krona has strengthened on the speculation that the nation’s Central Bank will keep raising interest rates to combat inflation as the economy grows. The rise next week is expected to be by 25 basis points taking the rate up to 1.75 percent.
The currency has appreciated for the third consecutive day. The Swedish economy is expected to grow by 3.8 percent in 2012.
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