Sterling Stable for Now?

We all waited in suspense as a raft of data surged through the economy at GMT 09:30 this morning. With fears for the worse we were relieved when there was very little change reported in major gauges of the market such as consumer price index and retail figures. In explanation as to why we might take this as a good sign; investors believe that 2011 will be a tricky year across the board therefore, economies that can show a certain level of stability will, in the long run fair better than those that don’t.

Pound Sterling – UK Markets

At last positive news is seeping (albeit very slightly) out of the UK. Over the past few days’ sterling strengthened against the US Dollar and the euro as the market factored in reports that showed inflation remained stable. It is now considered a given that interest rates are to be kept on hold for sometime but sterling may start to creep forward as Eurozone and US debt issues remain high on the agenda. However, one thing that will constantly bring us back down to earth is UK housing data. Economic growth is still poor which has led increased lending restrictions and consequently a leading UK house price gauge has fallen. Overall confidence in the housing market has decreased and many are expecting to see this continue into 2012.

US Dollar – US Markets

The dollar fell against most of its major counterparts after data revealed China’s retail sales and industrial production increased, dampening demand for haven currencies – if the dollar can still be considered this. Slowing levels of growth in China and India have been threatening to de-rail several currencies for sometime and should this continue the dollar is likely to suffer further. Further quantitative easing would be the ‘worst outcome’ for the debt issues facing the US. This was the stark warning released by Federal Reserve Bank of Dallas President Richard Fisher. There have been ongoing discussions that the Fed may be looking to throw more money at increased levels of debt and at one stage this appeared to be on the verge of occurring. The debate only adds to the uncertainty surrounding the US economy and the dollar itself opening the way for further downward pressure on the Greenback.

Euro – European Markets

Leading credit rating agency Standard and Poor’s has branded Greece with the world’s lowest rating. The move see’s the debt ridden nation move from B to CCC on the view that the nation is likely to suffer one or more default in the future. The triple C rating is just one level up from bankruptcy. Continuing from yesterday’s news, the European Union is set to meet today and it is expected that finance ministers will struggle to resolve Greece’s debt crisis amicably. Unfortunately, there is little data due out that is likely to add resolve to the euro. Hold tight, this could get interesting.

Other Currencies – Highlights

Riding on the back of increased levels of inflation in China, the Australian Dollar has climbed. The Aussie has erased earlier declines as Chinese industrial output grew more than economists had forecast. However, Australia’s neighbor New Zealand has not been so fortunate. Aftershocks that struck Christchurch yesterday may force the central bank to delay increasing interest rates until next year. Consequently, the New Zealand Dollar may see a decline over the coming weeks.