The close of play has seen some very interesting developments in the FX markets. The euro has rallied tremendously against the dollar up 1.22%, against Sterling up 0.45% and against the yen up 1.67%. This rally was put into motion yesterday morning as investors reviewed their positions, with the general consensus being that the previous shorting of Euro futures contracts was an overreaction to recent news surrounding the Greek finances.
A snapshot of the market will highlight the sentiment regarding the dollar. During times of uncertainty the dollar is the first safe haven for investors who have lost their risk appetite. Conversely, as investors change their priorities, which can happen overnight, the dollar is subject to a tumble. Keeping in mind the renewed confidence from the market, 17:30 on Tuesday 16th Feb shows the dollar down by 1.25% on the Euro, down 0.78% on Sterling and down 1.52% against the Australian dollar. This fall has not been the result of poor economic news from the states but is simply a consequence of risk sentiment in the market place.
With reference to Sterling, despite a high rate of inflation the pound strengthened against the dollar by 0.78% (another possible marker of the shift in risk appetite through the selloff of the dollar). But as to be expected, Sterling was down against the Euro by 0.41% as the Euro looked, for once, the more attractive option of the pair.