Today is starting out with a weaker Euro and stronger Pound following yesterday’s European Central Bank decision to maintain interest rates at 1 percent. The following press conference yielded even more influence as markets were analysing Trichet’s words for hints as to when an interest rate decision in Europe might come. His comments however have been interpreted as much more subdued than his focus on inflationary pressure earlier in the week. If you have a transfer to make which the Euro-Sterling tug of war will affect, speak with your broker about target rates of exchange as they will be able to notify you when or if that target is reached.
Pound Sterling – UK Markets
The Pound has climbed higher fuelled by yesterday’s strong PMI construction data with this morning also seeing a monthly rise in house prices recorded by Halifax. Halifax have shown a 0.8 percent increase in house prices for January from December. The property market is still vulnerable however with prices being 2.4 percent less than a year ago.
The European interest rate decision yesterday also helped Sterling by dampening interest in the single currency. An interest rate increase was thought less likely whereas the PMI date from the UK this week has reignited expectations that the UK rise may come as soon as May.
US Dollar – US Markets
The US Dollar has gained on the Euro and made moderate gains on the Pound as data revealed that the US services sector grew at its fastest pace since 2005, reflecting the progress also made by services in the UK this week.
Today sees the crucial release of US non-farm payrolls and unemployment data for January. Markets will be watching to see if US jobs are continuing to improve or not. Expectations are for a slight increase in unemployment to 9.5 percent.
Euro – European Markets
The Euro has fallen fairly steeply over the past twenty four hours following yesterday’s decision to maintain interest rates at 1 percent coupled with a less hawkish tone from Trichet regarding rates at the following press conference.
Although it was widely expected that interest rates would be held, markets had been speculating that yesterday would give some clues as to when a rate rise might come – but Trichet disappointed anyone hoping for an early rise being much less hawkish saying that inflation risks were ‘broadly balanced’.
Other Currencies – Highlights
The Australian Dollar has gained following an increase in annual growth forecasts for 2011 by The Reserve Bank of Australia to 4.5 percent from 3.75 percent. There is also now an expectation for consumer prices to increase by 3 percent rather than 2.75 percent. Although the recent floods are expected to impact on GDP figures, string levels of growth are now expected for the second half of the year.
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