US Dollar:
Much of the gains seen by the Dollar versus both the Pound and the Euro have been reversed. Against the Pound, the Dollar is down 0.22% in morning trading as many investors and traders have concluded that the sharp losses incurred by Sterling at the beginning of the week had gone far enough. The Dollar is also down against the Euro as risk appetite returns to the Euro Zone following upbeat news on the Greek bailout. Analysts forecast the Euro may rise to $1.380 but not break through that level.
Service industries in the U.S. probably expanded at a faster pace in February, a sign the pickup in manufacturing is trickling to the rest of the economy. This positive news on a steady US recovery will no doubt see the Greenback edge higher over the mid to long term. This morning sees the Dollar down against the pound at 1.501 and also down against the Euro at 1.364 as investors are trimming their long positions in favour of other out performing currencies such as the Yen.
Pound:
Sterling remains on the back foot this morning against the Euro hovering around the 1.10 level with some small gains (0.25%)
made against the USD. The pound has received a huge amount of bad press in the last few days including an article written in the New York Times with “investors asking if Britain may soon face its own sovereign debt crisis if the government fails to slash its growing budget deficits” like Greece. To add political spin to this argument Ken Clarke reportedly said in the Telegraph the UK economy would “crumble if Labour win the election”. It’s this uncertainty surrounding the general election and our fiscal deficit that is continuing to worry investors with regard to the UK economy and our currency. Audrey Childe- Freeman, currency strategist at Brown Brothers Harriman summed up the current sentiment for the pound “Underlying sentiment
is bearish due to the same themes – uncertain politics, poor economic performance, an uncertain monetary policy outlook and concern about debt. It’s hard to see anything positive for sterling at the moment.” UK service sector data is due out at 9.30am.
The sinking Pound and UK economy, part2
Euro:
The Euro is starting to trade a little higher against the dollar as nerves begin to calm over a Greek bailout. “The euro is finding some stability over the last week or so, and the prospect of aid for Greece has helped reduce the immediate contagion fear across the euro area periphery,” said Greg Gibbs, a currency strategist at RBS in Sydney.
The Euro is marginally down against Sterling in morning trading, however at 09:30GMT Greece plans to announce its new austerity package, a measure to get control of its finances. It will be interesting to watch how the markets react, this may be the start of a recovery in the Euro and sovereign risk appetite, or conversely, the package may be seen as too ambitious and crippling for a national already suffering.
This morning sees GBP/EUR 1.1012, the Euro down slightly from 1.09 seen yesterday afternoon. Against the dollar the Euro is up ever so slightly at EUR/USD 1.362.
An interesting news story emerged this morning suggesting several large hedge funds banded together in a bid to drive down the Euro. This, of course, is not the first time hedge funds have been brought to attention over downward pressure tactics.
Quote of the Day
“What you are afraid to do is a clear indicator of the next thing you need to do.” – Anon.