Sterling has fallen to its lowest level in two weeks against the US Dollar and also fallen against the Euro. There was some momentum against the single currency before yesterday’s Bank of England rate decision. However as policy makers held rates at 0.5 percent, the currency has since retreated. News of the tragic earthquake in Japan will come to affect currency markets. Currently, the two big safe-haven currencies, the Dollar and the Yen are strengthening.
Pound Sterling – UK Markets
The Pound has fallen to its lowest level in two weeks against the US Dollar and also tailed off from this week’s pre-interest rate decision high against the Euro. The fact that the Bank of England held rates at 0.5 percent yesterday has certainly done nothing to help the weakening Pound.
Research company Acadametrics Ltd and LSL Property Services Plc did offer some positive news on the UK housing market – with house prices rising 0.3 percent from January according to the survey. This was still a yearly fall of 0.5 percent.
Month on month producer price data this morning came in slightly under expectations.
US Dollar – US Markets
The US Dollar has gained on the Euro and the Pound before retail data later this afternoon which is expected to show a sharp increase up to 0.9 percent. Weak data from China regarding the Chinese trade balance surprisingly came in at a deficit of $7.3 billion in February which also encouraged investors to move funds over to the Dollar – despite the fact that the Dollar registered a trade deficit of its own.
Yesterday’s data from the US economy seems to have had little impact. The trade deficit came in worse than expected at a total of 46.34 billion Dollars and initial jobless claims also rose by more than expected up to 397,000.
Euro – European Markets
The Euro has been gaining on the Pound following yesterday’s interest rate hold by the Bank of England continuing to tip expectations that an interest rate rise is going to come sooner from Europe than the UK.
As has been the trend this week however, there is growing uncertainty over the state of European debt. Not only did Moody’s rating agency downgrade both Spanish and Greek ratings this week but there is growing speculation that Greece may default on its debts with Greek ten year bonds rising to a record
Other Currencies – Highlights
The terrible news that Japan has been hit by an earthquake has actually seen the Japanese Yen strengthen.
As the Japanese currency is predominantly used as a back-up safe haven currency, particularly in terms of global uncertainty or when a natural disaster occurs, the Yen has been strengthening so far today despite the fact the disaster is in Japan itself.
European Currencies Struggle to Stage a Steady Recovery