Sterling has remained subdued over the past twenty four hours as the dent made by yesterday’s unemployment figures took their toll on the currency and slowed down the recent gains fuelled by high inflation data. The Euro was the currency yesterday that gained some ground as a successful Portuguese bond auction took place and Germany increased its growth forecasts for 2011. Similarly to the Pound, the Dollar has been put on the back foot by a set of data – in the Dollar’s case, in the area of new home builds (house starts) which showed weakness in this area of the economy.
Pound Sterling – UK Markets
The Pound lost some of its recent gains yesterday following unemployment figures showing a rise in unemployment to 2.5 million curbing gains made by the recent higher inflation figures.
In the long term, the increased likelihood of an interest rate rise in the first half of the year is raising the prospects for Sterling growth but in the short term these unemployment figures and day by day data releases are bringing vulnerability. The next such release is tomorrow’s retail sale data for December which is expected to show a month on month rise but could disappoint due to the weather conditions last month.
US Dollar – US Markets
Yesterday saw the US Dollar drop to a two month low against the Euro as economic concerns in Europe eased as the strength of the US recovery is called further into question with data on housing starts revealing a falling number of US home builds.
Building work on new properties fell to an annual rate of 529,000 in December from 553, 000 in November - well below forecasts of 550, 000. This revealed the second lowest ever build rate since records began in 1959. The US currency still managed to edge up on Sterling but fell against many other major counterparts.
Today’s data will cast further light on the property sector with new home sales.
Euro – European Markets
Yesterday continued to be a brighter day for the Euro as the currency benefited from Sterling and Dollar weakness as well as better sentiment from a successful Portuguese bond auction and speculation that the European bail-out funds held in reserve will be expanded.
Economic data from Germany also helped as the nation increased its growth forecast for 2011 to 2.3 percent. How much this will help the single currency in the long term may depend on how well the rest of Europe can keep up.
Consumer confidence figures are due this afternoon.
Other Currencies – Highlights
Talks have continued between the US President and Chinese President in Washington with currency policy being a key issue. Officials have reported that £28 billion worth of export deals have been achieved.
Obama encouraged China to let the Yuan strengthen in a news conference with both leaders stressing the importance of fostering commercial ties. Chinese data revealed today that consumer prices rose by 4.6 percent with the economy growing by 10.3 percent in 2010.
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