Foreign Currency News Updates

Pound:
Sterling is continuing a recovery from initial falls seen yesterday morning after UK GDP data showed the economy had scrapped through and posted 0.1% growth for the last quarter of 2009. The pound fell upon the release of this news as market expectations increase over UK interest rates being held at the record low of 0.5% for a longer period of time. Bill Gross, managing director at Pimco, the world’s biggest bond house, warned against buying UK government bonds arguing high national debt could drive the pound down lower.

In the short term however, the pound is not the only currency under the spotlight, with the Euro continuing to suffer from concerns about the finances of various countries in Europe including Spain and Greece. Many economists are expecting the pound to rally against the Euro further as problems with the Euro-zone economy persist and if the market is free from any significantly poor UK economic data,

Retail sales volume data is forecast to be lower this month at 11 against 13 previously, as the pace of growth slows. The market is also awaiting a speech later today by policymaker Andrew Sentence who has recently provided indications that interest rates will rise in the UK later this year.

US Dollar:
The Dollar was up on the Euro and holding steady against Sterling this morning as global news supported risk averse trading, buoying the safe haven Dollar against its rivals. USD failed to put further pressure on Sterling however, as Obama’s proposal for new banking regulation was enough to maintain investor caution in the U.S.

Debt concerns in the Euro zone were enough for the Dollar to put reasonable pressure on the Euro, with China’s self imposed slowing down of their economy enough to create uncertainty in expectations of a swift global economic recovery. The current risk sentiment is supporting the Dollar, with Sterling holding its ground, although recent U.K growth numbers indicate the Dollar may advance on GBP as it has on the Euro in the near future. USD is certainly not infallible though, with Satoshi Okagawa, head of fx trading group Sumitomo Mitsui Banking Corp believing traders are wary of even the usually safe bet of the U.S currency:”There’s concern that if you buy risky investments, you could get hit by sudden political action at any time, such as the recent U.S. government proposal of new bank regulation, which set off a global exodus from such assets. It’s just hard to take risks for higher returns when there are various political risks around you.”

Near-term events that could influence exchange rates include the rate-setting decision by the U.S. Federal Reserve and U.S. President Barack Obama’s planned State of the Union address later in the global day. December U.S. home sales data will also be released later today, with economists polled by Dow Jones Newswires forecasting a 2.8% on-month increase. GBP/USD 1.6143, EUR/USD 1.4038.

Euro:
The Euro was down again in Sterling and the Dollar as risk aversion continued to convince investors to pull out of the Euro zone into safer investments such as the Dollar and particularly the Yen. The troubled finances of Greece continue to turn off Euro zone investors, with other nations in the region including Portugal now under suspicion of having fiscal problems of their own. Even though Greek Finance Minister George Papaconstantinou detailed a diversified global borrowing plan to plug government fiscal gaps including hopes to raise up to $10 billion from Chinese and other Asian investors, it was not enough to support the Euro, which is under serious pressure of late. The single currency will probably continue to feel the heat from the U.S Dollar, but recent losses on Sterling could be overturned if any negative sentiment comes out of the U.K regarding monetary policy this week. Poor U.K growth figures suggest a correction could be seen on recent GBP/EUR levels, with the Euro quite capable of bouncing back if investors in the U.K become wary. GBP/EUR 1.1501, EUR/USD 1.4038.

Quote of the Day
“A man’s worth is no greater than his ambitions.” – Marcus Aurelius