Budget-day in the UK has already seen some significant Sterling movement with the Bank of England minutes this morning causing the Pound to depreciate in value. With no new policy members voting for a rate hike, the minutes did not suggest that an interest rate rise will occur any earlier than already thought. This has sapped some of the gains made by the Pound yesterday on the back of the soaring inflation figure at 4.4 percent. The UK budget this afternoon will be watched by currency markets in order for them to interpret how well the economic recovery is likely to continue.
Pound Sterling – UK Markets
Following a surge in Sterling yesterday bought about by the soaring inflation levels up to 4.4.percent, the Bank of England minutes have arrived this morning to dampen Sterling and send it lower as they revealed that there have been no further members voting for a rate hike.
The minutes last month helped Sterling gain as they revealed an extra member had joined the rate hawks in voting for a rise - but this month there were no new additions and the same three members voted for a rise. The timing for the predicted 0.25 rise was also termed as likely to occur in ‘the middle of the year’ whereas last month the minutes had been a little more promising suggesting the hike would come in ‘early summer’.
The fact that most members are waiting for more sustained growth figures has not helped the currency as we also encounter the UK budget today.
US Dollar – US Markets
The Dollar has been gaining back on the Pound so far this morning following the UK Bank of England minutes but dropping against the Euro although the movement has been volatile.
With so much focus on European and UK interest rates, as well as debt issues in Europe and the UK budget this afternoon the Dollar is really responding to broader themes meaning that new home sales data this afternoon is likely to be overlooked.
Euro – European Markets
The Euro has come under pressure as both Ireland and Portugal have moved back into the spotlight for struggling to pay off their debt. A vote on austerity measures in Portugal today is making the Euro particularly vulnerable on speculation that the measures will not be passed which may then subsequently incite a resignation from the Portuguese Prime Minister.
Whilst the possibility that European interest rates could rise as early as next month has been fuelling the Euro, lingering issues over debt are coming back to the fore. As well as the situation in Portugal, rumours are circulating that Allied Irish Banks are planning to miss a coupon payment struggling to have enough funds.
Other Currencies – Highlights
The Swiss Franc has risen alongside the Yen as a safe-haven with ongoing uncertainty about radiation in Japan leaking from a damaged nuclear plant.
The safe haven currencies are also strengthening in response to the alliance-led planned attacks on Libyan ground forces.
Political Jitters in UK Weighs on Pound Sterling
Euro and Pound Sterling Recover Modestly on Friday
The US Dollar Rallies on Upbeat Data and Hawkish Fed Stance