Sterling has taken something of a battering this week. Although it has recovered some of the ground snatched away by Tuesday’s terrible – 0.5 percent GDP figures, subsequent data has not particularly lifted the mood. Judging by the Bank of England minutes, and poor consumer confidence figures coming in last night an interest rate rise does not looking likely until at least August. David Cameron has made a speech in Davros at the World Economic Forum with a strong stance on spending cuts being the way to get the UK economy back on track, although he did concede that the pace of recovery will be choppy.
With so much uncertainty in the UK markets and many of our clients having regular overseas mortgage or pension payments to make, this is a good time to ask your broker about our regular payments service. This allows you to fix a rate for your regular standing order so you have no nasty surprises as the months unfold!
Pound Sterling – UK Markets
The Pound slipped against the Euro as the CBI Trades Survey Data yesterday indicated trends in retail and whole sale distribution came in with a lower reading than expected for January. This was followed by GFK consumer confidence figures which were released at midnight and revealed a drop to a two year low in UK consumer confidence.
This downbeat end to the week in terms of data may shift slightly depending on how David Cameron’s speech on the UK economy in Davos is treated in the press and by markets. He has defended moves made by the coalition and whilst focusing on the seriousness of the economic situation, justifying spending cuts, he also highlighted progress made such as the UK’s ability to maintain its credit rating.
US Dollar – US Markets
The US Dollar fell against the Pound throughout the second half of yesterday on the back of weak economic data but is picking up again this morning. Poor weekly jobless figures were the key disappointment yesterday and markets will be closely watching US GDP figures for the fourth quarter today.
Initial jobless claims rose by 51,000 last week to 454,000 where only a rise to 409,000 was expected by markets. Durable goods orders also fell although existing home sales did rise by 2 percent in December.
Today’s release of fourth quarter GDP figures are awaited with baited breath following the shock contraction in UK GDP for the same period earlier this week. In theory, the GDP announcement, should in come in as expected and fuel the Dollar. An annual figure of 3.5 percent is expected, up from 2.6 percent in the previous quarter. Should this fall under expectation due to poor weather as was the case in the UK, the currency could be set for an end of week slide. The release is 1.30pm GMT so speak with your broker before then regarding Dollar rates.
Euro – European Markets
The Euro has experienced moderate gains against the Pound and Dollar and is still in a relatively strong position following Trichet’s comments that the European Central Bank are determined to keep a cap on inflation which has raised speculation about when an interest rate rise might occur.
Data yesterday also revealed that economic confidence was high meaning that news that Belgium may suffer a ratings downgrade due to political deadlock has now impacted on the single currency as of yet.
Other Currencies – Highlights
The Canadian Dollar has gained again against the US Dollar having now traded at levels stronger than parity with the American currency for the 23rd straight day.
The currency also strengthened against most of its other counterparts even though crude oil prices fell as stocks and copper climbed. The US interest rate decision yesterday to maintain the record low rates is also expected to shore up demand for industrial metals.
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