Foreign Currency News Updates

Pound:
Sterling is managing to hold it’s strength against the major currencies of the world this morning, including the USD and Euro. Concerns over public finances in Greece are continuing to undermine the Euro with the market likely to watch closely, comments from a Euro zone finance minister later today. The pound has also seen renewed strength after stronger house price data released by the popular rightmove website. Data pointed to a solid recovery in the housing market, taking the annual rise to 4.1%, this does not surprise me after seeing how busy my local estate agents were at the weekend, let’s hope it lasts!

In other business news the pound has also been supported by speculation that French utility company GDF Suez is eyeing a tie-up with the UK company International Power which could see a large buy of sterling in the market. In less supportive long-term news the mail on Sunday (the paper that wins my scaremongering award) reported that the UK faces “tens years of hard slog” to pay off towering public and private debts and fight its way back into export markets, a report due this week will claim.

Sterling in the short-term is likely be tested significantly this week starting with tomorrow morning’s monthly inflation release (CPI) and bank of England Governor Mervyn King speaking at 7pm, watch out for his comments in particular.

US Dollar:
The Dollar was up against the Euro as risk sentiment crept back into the market following a financial scandal in Japan, but down against Sterling as GBP maintained its gains from last week on the greenback, with further news of a rise in U.K house prices boosting GBP over the Dollar. The news in Japan that financial minister Ozawa’s political fund-raising was brought in serious question sent risk aversion flying through the markets as traders sold off the Euro and bought back in to the Dollar to protect their trades against the current sentiment.

Trading will be light today as the U.S takes a day off to remember
Martin Luther King. We should therefore see the Dollar maintain tight ranges as it sits down on Sterling and stands stronger against the Euro, with events in U.K and the Euro zone the main factors in any current market movement. If events globally continue to create risk sentiment, the Dollar will continue to gain ground on the Euro, especially while debt concerns in Europe prevent the Euro from any real gains on the Dollar. At the same time, Sterling’s recent gains on the USD should hold steady for now, but U.K political rhetoric in the run up to the election could have real concerns for the U.K currency if there is no certainty on who will lead the country effectively. GBP/USD 1.6336, EUR/USD 1.4370.

Euro:
The Euro was down against Sterling and the Dollar this morning as traders sold off the single currency on news of a financial scandal in Japan causing speculation that investors would be more risk-averse. Japan Secretary-General Ichiro Ozawa was arrested as an investigation into his fund-raising activities has so far resulting in the arrest of three of his associates. If investors are less willing to take risks on the back of this news it could knock the Euro further.

Debt burdens in Greece continue to weigh down on the Euro, with the positive growth of Germany not enough to alleviate investors’ fears to the economic recovery of the Euro zone. The ECB have even released a legal analysis of the consequence of any Euro zone country leaving the single currency, fearing if Greece fall, others could follow. Traders have skirted the issue of Greece, hoping Athens’ suspect fiscal plans would disappear. A view has been taken in some camps that Greece is only peripheral to the Euro zone and shouldn’t affect the EU all that much, with an EU bail out the answer if all else fails. However, with remarks late last week by ECB President Trichet and German Chancellor Angela Merkel indicating Greece shouldn’t receive aid and could create wider concerns for the European community, investors have been rattled and sold off the Euro, leading to its current decline against Sterling and the Dollar (as well as a rise in U.K house prices contributing to Sterling’s gains). GBP/EUR 1.1369, EUR/USD 1.4370.

Quote of the Day
“Take risks: if you win, you will be happy; if you lose, you will be wise.” – Anon.